Friday, October 01, 2010

Is the US Litigation Culture About to Arrive Here?

When I met DAS last week to discuss their sponsorship of my blogreaders' party at the party conference on Tuesday, they told me about a subject which hadn't crossed my radar screen before. This is the fact that the Ministry of Justice seems determined to introduce US style contingent fee arrangements into litigation in England & Wales. In a dim and distant past I used to be an insurance reporter for Lloyd's List and I remember writing about legal expenses insurance, which in those days was in its infancy.

There is a fundamental principle in England & Wales that whichever side loses litigation, has to make a substantial contribution to the winner’s costs. This Adverse Costs principle ensures early settlement of claims which have clear merit and gives a commercial incentive to both sides to act reasonably, deterring claimants from bringing and defendants from defending actions they are likely to lose.

The highly controversial Jackson Review appears to seek to introduce a US contingent fee litigation culture where individuals can bring claims with no financial risk to themselves, resulting in an escalation of claims, many of them vexatious or without merit. And now to general amazement, the MoJ seems determined to press through this fundamental change.

In the complete (and understandable) absence of Legal Aid, the current reality for claimants seeking compensation for injuries or wrongs is that it is a tough struggle. Claimants have to accept liability, win or lose, to pay lawyers at least part of their fees or outgoings and to make provision for the possibility of losing and having to pay the other side’s costs. The insurance market has produced a number of insurance products designed to address these risks, all of which the Jackson Review, seeks to sweep away, in favour of contingent fees. God help us!

Access to justice and the rule of law are the hallmarks of a civilised society. Private funding of litigation is outside the financial capabilities of most individuals. Any system of justice must make legal representation affordable and mitigate the risk of the individual to their own and their opponent’s costs. Surely this can be done without importing to this country the funding basis of the excesses of US litigation culture. If Lord Young’s report to David Cameron, due to be published next week, concludes that there is a compensation culture in this country which needs addressing, implementing these reforms will backfire with catastrophic results for the public purse – not least the National Health Service Litigation Authority.

I know there are many lawyers and insurance industry bods who read this blog. What do you reckon to this. Are these fears well grounded?

19 comments:

MikeyP said...

I would say the Litigation Culture has already arrived here.

Lord Blagger said...

We need class actions.

Take local authorities. In many cases they have lost parking cases because they have been acting illegally. To keep the money is theft under the theft act. If they know they have acted illegally and gained money, they are now in a position of trust, and have to return the cash.

However, they don't. They have taken the view that's their money, and if they keep quite, they will get away with it because the victim doesn't know.

Class actions solve this problem. It's the force that will change local authorities and the state in general.

Nick

Lord Blagger said...

not least the National Health Service Litigation Authority.

============

You're not thinking Iain.

The NHS contributes to the deaths of 20,000 people a year. Their figures.

Are there 20,000 compensation bundles paid out?

What about the people who are maimed? Not a peep.

ie. When you say that the NHS litigation budget will expand and that's a bad thing, you are implicitly saying that the victims have to suffer.

We can't have the NHS paying out money. The victims must pay and suffer.

Bardirect said...

Even in the US they do not allow wholly unqualified people to generate claims yet that is precisely what "opening up the market" has done, with a plethora of ostensibly regulated and still more unregulated "claims farmers" who trawl the High Streets on their Saturdays off from being a heating engineer or other job, with a view to selling on those "leads" many of which are worthless, exaggerated or plain fraudulent and were traditionally filtered out by the High Street practitioner who has been driven out of this work entirely. Yet there remain many people who do not make legitimate claims because this is now being stigmatised.

neil craig said...

Barrarty "The offense of persistently instigating lawsuits, typically groundless ones" has long been a crime. It would be very much in the nation's interest if this law were enforced against various lawyers. It is because of such lawyers that the Americans spend about 50% more of their GNP on doctoring & have worse outcomes.

Lord Blagger said...

So what do you spend in the UK?

Most people haven't a clue.

UK population 60 million

UK government spend on health care. 239 billion

http://www.ukpublicspending.co.uk/

So 3,983 pounds a year, per head.

Way more expensive than the US.

Charles Stuart said...

It already exists. I brought a case for unfair dismissal at an employment tribuanal - after a preliminary hearing at which I had to represent myself, the employer's barrister asked the judge that I be required to put up £500 against the risk of my case failing. The judge agreed - I had to climb down because I could not afford the financial risk.

George said...

This is not a good move.

We seem to have become risk averse as a result of the present arrangements which have made life a misery.
But, to bring in the Yankee scheme will result in frivolous lawsuits designed to extract money from commercial company's and wealthy individuals.
You cannot expect venal lawyers to adhere to an unwritten caveat that dubious or frivolous or rank blackmailing lawsuits would not be pursued.

This is one baby which must be strangled prior to birth.
Legal Aid has put much of justice at a distance from the middle classes already. this just simply ennables them to be fleeced, legally fleeced and bankrupted.

Scary Biscuits said...

I don't know why the Labour Party is so upset. It's as though they never lost office.

It's not just the continued atrophy of the legal system. Government spending is forecast to rise for next five years. Bribing foreign dictators is ring-fenced spending but bullet proof vests for squadies isn't. We've got William Hague banging on about climate change and Crispin Blunt insisting on the right shaped vegetables for prisoners, that is, if Ken Clarke hasn't let them out of prison so quickly they didn't have time for a meal.

Different people, same old loony tunes.

Bill Quango MP said...

Out of interest Charles Stuart.
Did the judge ask you to put up the money because he thought your case unlikely to succeed?
I have attended dozens of employment tribunals and have never experienced this.
Was your case quite recent?

longrun2 said...

Thanks to DAS and a handful of competitors there exists legal expenses insurance (also known as "After the Event" or ATE) so that anyone with a decent case (usually, but not invariably accident victims)can purchase, for a modest sum, insurance protection for the legal costs involved in suing for damages. Therefore contingent fees are unnecessary.
A substantial number of lawyers are trying to transplant the US litigation culture with a regrettable degree of success but not all of us are conned into launching a claim when the legal fees would exceed a fair estimate of the damage suffered. If you talk to your friends at Lloyd's List you will learn that the numbers who have been conned has soared since Brown's bubble turned to bust.

jghardman said...

Yes, your fears are well founded. Our watered down 'cfa' system has been a fine example of the law of unintended consequences.

We want a first class legal system at bargain basement prices. We get neither. The public now sees legal services as something which need not be paid for, so the law is not valued. What costs nought s'worth nought.

The best answer is a properly run legal aid system, but since we will not get that, just work with the system we have and try to iron out the worst abuses, such as claims farmers.

However, no system is, or can be, perfect.

Donal Blaney said...

DAS are part of the problem, in my opinion, not part of the solution. Legal expenses insurers seek to persuade customers that their policies will cover them but in all too many cases that is not the case at all - and clients are prevented from instructing lawyers of their choice until a case is ready to litigate (which is, of course, not the way disputes are supposed to be resolved: pre-litigation discourse is the proper way forward and yet legal expenses insurers such as DAS refuse to allow lawyers to handle such negotiations on their clients' behalf). Plus the rate companies such as DAS pay, assuming they actually cough up, is derisory.

We have nothing to fear from contingency fees per se provided those who bring unmeritorious cases risk sanction. We have more to fear from the end of legal aid, excessive damages awards and insurers who pretend that their products are the solution when they are anything but.

IMHO, of course.

Donal Blaney said...

DAS are part of the problem, in my opinion, not part of the solution. Legal expenses insurers seek to persuade customers that their policies will cover them but in all too many cases that is not the case at all - and clients are prevented from instructing lawyers of their choice until a case is ready to litigate (which is, of course, not the way disputes are supposed to be resolved: pre-litigation discourse is the proper way forward and yet legal expenses insurers such as DAS refuse to allow lawyers to handle such negotiations on their clients' behalf). Plus the rate companies such as DAS pay, assuming they actually cough up, is derisory.

We have nothing to fear from contingency fees per se provided those who bring unmeritorious cases risk sanction. We have more to fear from the end of legal aid, excessive damages awards and insurers who pretend that their products are the solution when they are anything but.

IMHO, of course.

Alex_B said...

I don't know if the US litigation culture has arrived. However, I think the pre-action protocols have, along with the 'loser pays' costs rule, encouraged settling.

Also, I think one of the good things that will stop the US litigation culture is our split profession with the independent Bar. Barristers don't have the celebrity of American lawyers and also, are another check on the worthyness of the case.

I do hope that we don't allow the US litigation culture to arrive, I cannot imagine anything worse (and you think now is bad?).

DespairingLiberal said...

Lord Blagger has a solid case. Too many times in the UK, the law favours the "authorities" situation, which typically consists of taking our cash and holding on to it, even when they should give it back. Against this, the ordinary citizen has no redress, since the current system is built around the interests of wealthy individuals and highly protected corporations and public bodies. The latter in particular frequently act more like mafia than responsive public officials. This is particularly true in those areas where the public regularly come into (bruising) contact with them - parking fines, traffic penalties, misbehaviour of planning authorities, arrogant misuse of the roads by utilities, offensive behaviour by under-accountable privatised public utilities, etc.

We really do need the ability to cheaply join mass class-actions on specific campaigns. A great example would be the absolutely shocking ways in which the big ex-public companies like British Gas, BT, water companies, railway companies in particular (now all effectively unaccountable private monopolies with huge powers and arbitrary direct debit rights) take advantage of their powers.

Then we can move on to the other abusers of the system - local authorities, Quangos, HMG in it's many guises, bent legal firms, corrupt MPs now in the House of Lords who tilted the law in favour of "rights owners" to give them bizarre powers to terminate internet connections and prosecute the parents of minors, etc, etc.

Lord Blagger said...

That's the point. How does the little person get redress against the powerful.

Currently we have a major issue. 20,000 killed per year by the NHS, but the number of compensation claims is very small.

Iain says that compensation is bad because it takes money from the NHS.

That's an attrocious position to take. It's so awful that I suspect he's taken his brain out whilst he's written the article.

Iain has basically said that the victims of errors and incompetence shouldn't get redress because the NHS as an organisation will suffer. Sod the patients.

That's wrong.

The are many things that compensation achieves.

1. Recognition of the harm done
2. Money to enable as near a normal life as possible. In the case of a death, to the family.
3. As a big incentive to improve.

If he's against the compensation to victims of the NHS, no doubt Iain would say that soldiers and their families should be denied compensation because it takes money away from the army when they are fighting wars.

Not acceptable either, and neither is the issue for the NHS

Bermondsey Mum said...

Iain, I found this thread having done a search in response to an item on the Today programme. I have to say and speaking as a PI/Clin Neg practitioner, what strikes me most about claims against any public sector body, is the general attitude one encounters in relation to the event or adverse outcome. It could be summarised as "not sure it's my job to deal with this so I will leave it to someone else". Trouble is, over and over again one is reminded that these people are 'professionals' and yet it seems to me that the reason why there are so many (successful) claims against public sector bodies including the NHS is that they do not act like professionals and take responsibility for decisions they make in their daily work. Whatever the system to provide redress to claimants, be it CFA or Contingency fees, until that fundamental issue is addressed in those sectors, the number of (successful) claims will not decrease and therefore the public sector will continue to have to pay out for sloppy negligent mistakes which have profound consequences for service users.

Lord Blagger said...

Quite. 20,000 deaths a year where the NHS cause of contributes.

That leaves off the examples from yesterday.

One guy had a testicle cut off by an incompetent doctor.

The other even more serious where the untrained nurse turned off a life support machine causing serious brain damage. What are the damages going to be in that case? Is the NHS trying to fight that one which is basically screwing the victim in order to keep the organisation in clover?

In that case, it was the patient who put in place security cameras because of bad treatment as a 'defence'. It didn't work. What goes on behind closed doors is the same.

It's time to split the NHS into provider, regulator and insurer.

All the government needs to do is make sure there is universal coverage, and for those that can't afford the 4,000 pounds a year per person, to top up those people's income.

Nick

PS cost of better insurance in Switerland is 2,800 pounds plus a 500 pound excess.