Looking ahead to legal changes

In this occasional series of insights from the insurance industry, Jim Wilkes explains the likely changes to criminal and civil law that those involved in workplace risk controls must know

Workplace injuries can expose an employer to two different types of law.

Firstly, criminal (regulatory) law where they have breached H&S regulations and for which the employer could be fined or in the case of directors, fined or even imprisoned. Secondly, civil law which deals with the legal action that an injured employee could bring against the employer. This latter action would be for damages for the injury and any consequential losses, for example any wage loss. The cost of civil claims has increased considerably in the last two decades and much of this increase relates to the legal costs incurred with such claims. Indeed for some claims, the damages that the claimant receives can be less than the fees charged by his legal advisers.

Both the criminal law and civil law position is likely to change in the next few months. The Government has introduced a Bill (Enterprise Bill) which amongst other measures, seeks to remove 'strict liability' from health and safety provisions. This would mean that to succeed in a civil claim, the injured party would have to prove that his employer had been negligent, that is they failed to take reasonable measures (as far as reasonably practicable).

Currently where a strict liability provision exists it is possible to succeed in a claim even if the employer had taken all reasonable measures, but despite this the employee was injured.

Whether this measure (if introduced) will actually reduce potential claims against employers remains to be seen as many claims against employers would equally succeed under negligence arguments.

Changes to the civil law processes April 2013 sees the introduction of wholesale changes to the civil law processes. These changes arise partly from the 'Jackson' review, partly from the Legal Aid, Sentencing and Punishment of Offenders Act and also from changes introduced by the Ministry of Justice. In simple terms, the overall purpose of the changes is to try and reduce the legal costs involved in personal injury claims and to correct what has been seen as an imbalance between claimants and defendants, which made it potentially risk free for a claimant to bring a claim.

The changes are complex. Assuming that they are all implemented in April 2013 it will be at least one year before it is possible to know whether the measures have achieved their purpose. The headline issues include the removal of success fees whereby a claimant lawyer received a top up (success fee) from the employer's insurer in addition to their costs incurred. Instead, there are 'damages based agreements' which mean the claimant's representative can take up to 25% of the claimant's damages, giving the claimant a financial interest in his own legal costs.

After the event insurance policies, the premium for which also had to be funded by employers' insurers, will go.

Referral fees which have become a feature of personal injury claims in recent years (and have added to costs) will be banned. All of this sounds positive and should help to contain insurance premiums which are very sensitive to the amount of costs incurred in dealing with claims.

However, it is likely that because of all the changes, damages awarded to claimants could increase by an average of 10%, and potentially more depending on the type of injury class. Employers and their insurers will have a very limited time period to make liability decisions (30 working days for workplace accidents) and even if the insurer successfully defends a claim any legal costs incurred will not be recoverable from the claimant. Moreover, the tactics involved in dealing with claims may change and employers will need to have an insurer and broker who are geared up for the changes and can help navigate the employer to avoid pitfalls.

Prevention is better than cure It is impossible to predict the outcome of the totality of these changes at present. It will require at least a year after full implementation before the claims position stabilises. The key is to cut through the complexities and to guide employers on what they need to do; hence the need to talk with your insurer and broker. A point which often gets missed when considering changes in the claim environment is that prevention is always better than cure.

Employers who wish to minimise their involvement in claims should maximise their approach to risk management. For example, where Personal Protective Equipment (PPE) is a requirement, is the employer implementing best practice by recording the issue of PPE; are they training employees properly in its use; and are they taking a consistent approach to enforcing the use of PPE? Legal changes always lead to a period of uncertainty which can last for years. Our recommendation would be to develop and maintain an effective risk management regime so the costs involved will be far less than dealing with the consequences of risk management failures.

Jim Wilkes is the senior casualty underwriter at Zurich Insurance