Richard Lewis, ‘Compensation Culture Reviewed: Incentives to Claim and Damages Levels’

This article considers some of the problems, real or imagined, that have given rise to the usually pejorative term ‘compensation culture’. In focusing upon personal injury litigation, it looks first at the rate at which claims have increased. What might be the reasons for a greater propensity to sue following certain types of injury? Attention then turns to a topic which has been less often examined: the rising cost of each claim. Why are insurers and Health Authorities, among others, having to pay out more for each successful claim? Overall, the focus is upon the allegation that society has had to bear an increased burden as a result of the rising cost of personal injury litigation.

In looking at the propensity to claim, recent developments with regard to the procedures adopted by insurers, claims management companies and claimant law firms are examined to illustrate how these institutions have influenced whether an action is brought. In looking at costs, the article describes the changes in tort damages that have taken place in recent years. Reforms have been made not only of the method by which damages are computed, but also of the form in which damages are paid: periodical payments are now common in cases involving serious injury. Damages for pain and suffering have been raised substantially without appreciating the full policy implications whilst damages for financial loss have had to be revised to match the realities of financial world. These various changes are placed in a wider context which sees the increasing cost of claims as an inevitable result of closer adherence to the principle of restoring the claimant to the financial position that was enjoyed before the injury took place. Following proposals to reinforce that principle still further, it is concluded that there will be concern about compensation culture for some time to come.

Lewis, Richard, Compensation Culture Reviewed: Incentives to Claim and Damages Levels (July 16, 2014).

First posted 2014-07-21 06:06:41

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