Referendum to cap insurance awards may be the only solution

A culture of dishonesty and greed, fostered by some of our judges, has permeated the Irish legal system, undermined the confidence of the public in our compensation laws and led to exorbitant insurance costs that are putting people out of business by the day.

The issue has come to the fore in recent days thanks to the straight talking of former High Court president Nicholas Kearns, who said that people who do not believe there is a compensation culture in Ireland should join “the flat Earthers” or climate change deniers.

In fact, the public is only too keenly aware that a compensation culture is now out of control and the only people who deny it are the judges who give the ludicrous awards, and members of the legal profession who profit from them. The insurance industry is not blameless either. For far too long they have colluded with the legal profession and shown a willingness to pay easy “go away money” to claimants.

It should be emphasised that the issue here is not claims for life-changing injuries but the raft of claims for minor injuries generally made against local authorities, schools, creches and retailers, the so-called “slips and trips” that are now such a feature of our legal system.

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Book of quantum

The core problem is that these claims, and the exorbitant awards they generate, do not involve fraud, which is another issue that need attention, but are regarded as perfectly legitimate by our legal system. They are based on a book of quantum which itemises the scale of payments for every possible type of injury. A quick flick through the book shows just how absurd it is.

For instance, take a hand injury. A minor hand injury is defined as an injury “where there is no tearing of the ligament, and often no movement is lost, although there may be tenderness and slight swelling which has substantially recovered”. For such a mild injury the appropriate award is listed as being between €19,000 and €36,000.

For a similarly mild forearm or elbow injury “where there is no tearing of the ligament, and often no elbow movement is lost, although there may be tenderness and slight swelling which has substantially recovered” the automatic payout is between €14,000 and €33,000.

For a thumb the figure is up to €21,000 and so it goes for all possible forms of minor injury where there is no serious or permanent damage. For moderate injuries defied as partial tears to the ligament the awards go over €40,000 and for actual tears they are over €50,000.

When you consider how hard the average person finds it to save a substantial sum like €20,000 the prospect of such easy, tax-free money is an obvious inducement to sue at the slightest opportunity. What makes a bad situation worse is that some judges are known for dispensing even more than the recommended amounts.

The book of quantum is clearly at the heart of the problem and this was recognised in two reports carried for the Personal Injuries Assessment Board by a commission chaired by Mr Justice Kearns which completed its work last autumn.

The report showed clearly that personal injury compensation payments for soft-tissue injuries such as whiplash are typically 4.4 times higher in Ireland than in England and Wales. “The multiple that has emerged in the benchmarking exercise is so significant that the commission is satisfied that it calls for a response that is effective and achievable in the shortest time,” said the report.

One key recommendation was that the proposed new judicial council should compile a new set of guidelines for personal injury awards, similar to the system in Northern Ireland and the rest of the UK. Legislation establishing this body has been making very slow progress through the Oireachtas but has now finally passed committee stage and should become law after Easter.

Insurance premiums

Minister of State at the Department of Finance Michael D’Arcy, who is responsible for piloting it through, said this week that the “highest levels of awards in the world” were pushing up insurance premiums and collapsing businesses. He didn’t put a tooth in it by conceding: “Those levels of awards are coming from the judiciary.”

As if dealing with the issue was not complicated enough some judges have indicated their opposition to the prospect of a substantial reduction in the scale of awards being proposed by the Kearns report. D’Arcy has warned that if radical changes do not emerge as a result of the process a referendum may be necessary to force the issue.

“Let the people of the country make a decision that the Oireachtas has the authority to cap the awards,” he said in recent days. Giving the power to politicians to cap the awards is not the approach favoured by Kearns but if the judges resist his proposal to deal with the problem there may be no other option.

There is now a broad political consensus that action is long overdue. “Between them the judges and the lawyers have torn the arse out of it and we simply have to sort out the problem,” said one of the politicians involved in the debate. It is just a pity it has taken so long.