The Bacon report calls for a fundamental reappraisal of personal injuries compensation, writes Carol Coulter, Legal Affairs Correspondent
Last week the Tánaiste, Ms Harney, announced the setting up of a Personal Injuries Assessment Board as the centrepiece of her proposals to tackle insurance costs. Such a board would assess the damages to which the victims of industrial or road accidents were entitled, and this would reduce the involvement of the courts. However, dissatisfied plaintiffs could appeal to the courts, which would decide issues of liability.
Some months ago the Bar Council asked economic consultant Dr Peter Bacon to look at the cost of setting up a Personal Injuries Assessment Board. He responded that it was asking the wrong question. A cost-benefit analysis of a PIAB could only be undertaken by looking at the context in which such a board would operate.
He examined the way in which such boards operated in other countries, and concluded that this was so different from the Irish context that such a scheme could not be grafted successfully on to the Irish situation. Either the overall context needed to be changed, or we needed to look afresh at ways to improve the efficiency of the existing system.
Drawing on research carried out for the Department of Enterprise, Trade and Employment, he examined the systems in France, Germany, Sweden, the Netherlands, Denmark and New Zealand. In all these countries, except New Zealand, the social security system bears most of the costs of injury compensation. In New Zealand there is a publicly administered insurance system which bears the cost. In all these countries, too, there is comprehensive health-care, so the medical costs of accidents to the individual are negligible. Assessment boards for personal injuries operate in this context. Therefore, recourse to the courts, along with claims on private insurance, only arise in relatively limited circumstances. In many of these countries the right to go to court to sue for injuries received is restricted. Such social security and healthcare schemes are, of course, expensive. Taxes and social insurance contributions are much higher in these countries than they are here.
In Ireland the Constitution guarantees access to the courts for individuals. So any scheme that is devised must operate in the context of the continued unrestricted operation of this right, and any decisions of a board must be open to appeal in the courts.
Equally fundamentally, Ireland has devised a system of compensation for injuries based on private insurance, rather than social security, and the use of the courts to access and deliver this compensation. This has resulted in high insurance premiums.
"What can be concluded by a comparative analysis of Ireland with other systems is that the Irish system finances the costs of injuries in a different way to other countries," Dr Bacon writes."There is a choice between taxpayers paying high insurance or higher social security. In other words, a direct way to reduce insurance in Ireland would be to increase the proportion of that total cost that is paid through social security, implying that taxes will have to rise to meet the extra demands."
Assuming that the Government does not want to go down that road, Dr Bacon examines how a Personal Injuries Assessment Board would work within the existing social security and legal context. Because of the right to court access, potential claimants would have to be lured to the assessment board, rather than compelled to use it. People would have to be sure they would do at least as well there as in the courts.
Given that there is no proposal to reduce the level of payments made to claimants, the proposed PIAB would have to try to assess what level of damages a claimant would get by going to court. In order to divert claimants from the courts, the board would have to beat their expected level of payment, according to Dr Bacon. This would lead to an inflation of awards across the board, with a corresponding rise in insurance costs, unless the legal costs were substantially reduced.
This report says there is no guarantee that this board would remove enough cases from the system to significantly reduce legal costs. It would also do nothing to remove fraudulent claims from the system. "Because a PIAB does not directly address the sources of costs, and could push up compensation payments, its introduction into the system that operates in Ireland risks making the situation considerably worse," he writes.
He proposes an alternative - tackling the prevarication and delays in the existing system that push up costs. A previous report identified a 60 per cent increase in costs as a case progresses from one stage to another. Dr Bacon's report outlines a set of proposals aimed at getting cases settled at an early stage, and penalising parties who refused to co-operate, or put forward fraudulent claims.
Ms Harney's proposals were aimed at reducing the involvement of lawyers in the compensation system, by creating an alternative to the courts. Dr Bacon argues for making them more efficient within the existing system.