03 April 2009
Jocelyn Dorrell

The rise and rise of no-win no-fee legal services in recent years has had a big impact on health and safety management. Whether you think the "compensation culture" is an exaggerated media construct or a fair description of how things actually are, there's no doubt that the past 10 years have seen some substantial rises in the cost of employers' liability insurance premiums.

Manufacturers' organisation the EEF reported "galloping" price increases in the first half of the decade, followed by wide swings which saw premiums hiked by as much as 273%.

When devising safety policy and systems, today's health and safety manager must consider not only legal requirements and the possibility of prosecution, but also what they will do in the event of an employee launching a personal injury (PI) claim.

Of course the simplest way of avoiding compensation claims is to make sure you comply with basic health and safety requirements; the moral, legal and businesses cases for good health and safety are well known. But if you are notified of a claim, you will need to know what your first steps should be, who to go to for advice, and what your options are. Depending on your insurance contract, you may find your choices are fairly limited, so it's worth being prepared before a claim hits your in-tray.

Act fast

An employee who is injured at work can make a claim under civil law, alleging the employer has breached its duty of care to provide a safe place of work. The employee must usually submit the claim within three years of the incident. If the employer defends the claim, a civil court - usually the county court, but for bigger claims a high court - will decide whether they have been negligent or not.

Employer liability claims usually cite a specific piece of legislation. A worker claiming damages for hearing loss may allege that their employer has breached its duties under the Noise at Work Regulations, for example; while an employee injured lifting a heavy object might cite the requirements of the Manual Handling (Operations) Regulations. In civil law, cases are decided on the balance of probability.

Once you've received a claim, there are broadly three courses of action:

• pay the amount in full
• admit liability for all or part of the claim and seek to negotiate on the damages and costs
• defend (fight) the claim.

The clock is ticking as soon as the letter from the claimant's solicitor lands on your desk. If you ignore it, you could be ordered to pay the full amount of the claim plus costs. So it's important to act quickly. That said, you should never take matters into your own hands.

Nicola Lashmar, senior associate at law firm Eversheds, says health and safety managers may be tempted to go off and conduct an investigation and then get in touch with the claimant's solicitors, but they should resist the urge.

"Do not respond!" she warns. "This may invalidate your insurance. The very first thing you should do is pass the claim on to your insurer; that's why you pay them."

Phil Grace, liability risk manager at Norwich Union Insurance, agrees. "Don't even acknowledge it - leave it to the insurer," he advises. "The first thing the employer needs to do is send the claim to their insurance broker; 99.5% of businesses arrange their insurance through a broker so generally all communication goes via them."

 

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What's in a claim?
Research carried out on behalf of the HSE into claims made via trade unions, published in 2003, found that:

 

 

 

 

• the most common types of claims were as a result of: slips, trips and falls; manual handling; noise; and stress
• the main injuries sustained were unspecified pain; strains and sprains; deafness and hearing loss; cuts and lacerations; and bruising
• the average cost of a claim in the slips, trips and falls category was £4222; in manual handling £4325; and in noise exposure cases £1782.

For more information, see RR070, Analysis of Compensation Claims Related to Health and Safety Issues (www.hse.gov.uk/research/rrpdf/rr070.pdf).

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Level of deductible

Insurers hold many of the cards in handling PI claims, as many contracts stipulate that the insurer has the final say on whether to challenge or settle. Companies that feel strongly they want to fight claims may be overruled by cautious insurers looking for a speedy conclusion - fighting a claim, especially smaller claims, can be costly and time-consuming. But while settling may be expeditious for the insurer, it can mean higher premiums for the employer when it comes to renewal time.

"This is always an emotive issue," acknowledges Grace. "The dilemma we face is that with a moderate claim of £4000 to £5000, if we feel the employer hasn't provided us with evidence, we would much prefer to pay it. The employer may well want their day in court, but from my side of the fence, if we haven't got a robust defence, we will lose and then have to pay the defendant's costs as well as the claim. Whereas if we negotiate a settlement, we can often agree to pay £5000, say, and each side pays their own costs."

Malcolm Tarling, of the Association of British Insurers, says insurers have a number of issues to take into account, not least the injured person. "Insurers have to consider what's in the best of interest of the claimant," he points out. "Where the negligence is clear-cut, the insurer wants to deal with the claim as soon as possible.

"There are two reasons for this. Firstly, the longer it takes, the more expensive the process becomes. And secondly, you want to avoid a delay in getting people into rehabilitation."

How much say a company has over how to handle a claim will depend in part on the "level of deductible"; the excess that the insured must pay in any claim. "If under their employers' liability insurance, a company has to pay the first £10,000 of any claim, they should have some say in how the claim is handled," explains Nicola Lashmar. "If the deductible is £100,000, the bulk of claims will be in the company's hands. But some policies have no deductible whatsoever - the company pays a large premium up-front and let's the insurer deal with it all - so when any claim is made, the insurer pays.

"Companies are the insured party and have a right to make a representation, but how much notice the insurer pays will probably depend on the deductible. That said, the company is the defendant - you should be giving instructions to your insurer."

 

 

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PI claims: dos and don'ts
Do:

 

 

 

 

• inform your insurer or insurance broker as soon as you receive a claim
• investigate all incidents that could give rise to a claim, and record your findings
• keep evidence obtained during incident investigations
• take registers during training and keep records of what training has been delivered
• monitor employees to make sure they are following procedures
• review procedures after an accident or near-miss to make sure they're working as expected
• work with your insurer on your risk management systems.

Don't:

• ignore a claim; it won't go away
• respond to the claimant's solicitor yourself
• wait until a claim is lodged before you investigate an accident: evidence will have been lost and witnesses' memories may be vague
• dispose of training records
• file away risk assessments and safe systems of work in a remote cabinet: you're only complying with the law if employees are trained in safe methods and then adequately supervised/monitored.
  

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Fight or flight

Exaggerated and dishonest claims, encouraged by so-called "ambulance chasing" claims farms, are a cause of concern for many employers. There is an argument that a company that shows it's willing to fight spurious injury claims may discourage other such claims and save money in the long run.

Lashmar believes "the best advice is often, 'Pay early, pay less'," but she acknowledges that some clients are concerned about opening the floodgates. Some high-profile companies have a policy of denying everything."

If you fight and lose, it's much more public than just settling quietly and discreetly, and you need to remember that all evidence given in court is given in public," she cautions. "But it depends on the company. In a heavily unionised company, for example, the company might want to send a message to the union."

Grace says he is "in two minds" about the value of defending a claim to discourage others. "I'm not so convinced that paying out when someone falls off a ladder encourages other people to claim," he says. "If you have 20 people who've worked in a noisy area and one successfully brings a claim, then yes, you may have 19 others who decide to do the same. But I'm not sure the same applies to accidents from sudden events.

"We get a lot of work at height claims. People don't throw themselves off ladders. If someone gets their hand caught in machinery, they haven't done it on purpose. So I would say fraudulent claims are not a big problem. Exaggeration is possible, but I believe it's not that common, and we are very vigilant."

The better the knowledge the insurer has of their client's health and safety record and systems, the more confident they will be about supporting companies who want to fight claims. This is where a constructive relationship between insurer and insured can make a difference.

"Insurers have a very difficult ground to tread," says the ABI's Malcolm ­­­­Tarling. "They need to strike a balance between identifying the genuine claims and not paying out money on spurious claims." The key here, he argues, is insurers having better knowledge of firms' risk management systems, something he believes "absolutely" is happening more: "Insurers are very keen on risk management; they want to work closely with employers... A new insurer is going to want to see evidence of your risk management policy."

If you are determined to defend a claim and your insurer won't support you, there is an alternative to settling, albeit a higher-risk one. "Clients can choose to forego their insurance," explains Lashmar, "and say, 'We'll fight this ourselves.' This does happen."

If you decide to deny liability and defend a claim, you will need to appoint a solicitor. Here, again, much depends on your policy contract: some contracts will give you the freedom to nominate a lawyer; under others you will be obliged to use the insurer's panel.

Weight in gold

After informing your insurer of the claim, your next action should be to collate evidence, starting with the accident book entry and witness interviews. The sooner you speak to witnesses after an incident, the better the chance they'll be able to recall what happened. If plant or machinery was involved in the incident, you may need to arrange to get it analysed by an expert.

It's a good idea to take photos where possible and to retain any CCTV tapes of the incident. "These can make a massive difference to the likely outcome of the claim," says Lashmar.

"The costs of defending a claim are generally higher than the damages, so insurers will only fight if they can win. This is where health and safety managers come into their own: the collation and preservation of evidence is very, very important."

Phil Grace agrees: "Because of the lag between the accident and the claim, it is very important to keep contemporaneous records. Prepare a folder for the accident, with copies of the risk assessment, training records, and so on. It will be worth its weight in gold. When we send out a claims investigator, their eyes will light up and they'll get a warm feeling if they can see you have all this evidence together!"

If you've received a manual handling claim from a warehouse operative, and you know you spent thousands of pounds on tailored, job-specific manual handling training for warehouse staff, be prepared to call on the training company to provide evidence of how the course was designed, delivered and tested. This is where paperwork is crucial: it doesn't matter how much you've spent if you have no record - countersigned by the trainee - to show that the claimant actually received the training.

You may find a claim disappears very quickly in the face of a weight of well organised evidence. But all too frequently, evidence gets lost.

"It is very hard to succeed in defending a claim, as the law is stacked against employers, so you need to think about evidence," says Lashmar. "Another place employers fall down is on enforcing safe systems of work. They will have designed these beautiful systems which look great on paper, but when you ask, 'Did you make sure people were following these?' they say, 'Oh no, people didn't ever actually do this'!"

Value for money

Cases where the employer accepts liability and agrees to pay the sum specified are fairly straightforward. If you do accept that the claim is fair, though, this should automatically lead to a re-examination of your procedures (assuming you haven't already reviewed them during the incident investigation).

If you admit liability but consider the sum demanded to be too high, you can make a lower offer. The claimant doesn't have to accept it, but if they pursue the case and the sum awarded is lower than your offer, they will be liable for all legal costs from the date the offer expired (offers typically stand for 21 days).

Every case has a value," explains Nicola Lashmar. "The damages you pay aren't punitive; they should be based on the medical evidence."

Another option is to accept liability for the claim but to argue contributory negligence: you can lower the value of a claim if you can show that the claimant's actions contributed to the accident. So, if a claimant was injured moving heavy equipment, you might be able to argue contributory negligence if you provide evidence that the worker was trained on how to lift the equipment but lifted the item alone even though they knew the procedure was to employ a two-person lift.

We find contributory negligence is often the only line of attack in employer liability claims," says Lashmar. "It's similar to seatbelts in cars - if you aren't wearing a seatbelt when you have an accident, then any award for your injuries will be reduced because your failure to wear a seatbelt will have made your injuries worse."

Watertight

There's a strong argument for rigorously fighting claims if you - and your insurer - are confident about your risk management procedures. But if the employee doesn't back down when challenged, and you end up in court, costs can spiral: if you lose - and the claimant only has to satisfy the balance of probability - you will be liable for all costs and the compensation sum decided by the court.

Insurers are businesses: they don't want to spend large sums on costly claims defence, but nor do they want to pay out on dishonest claims. To give yourself the best chance of mounting a successful defence, your procedures need to be watertight and you need to have the records to show what you did and when you did it. A defence case is only as good as the evidence that supports it.

The employer-insurer relationship is crucial, but it's not easy for insurers to build up a picture of individual firms' risk management systems.

"It's difficult to have a feeling about firms - especially smaller firms - that have very few claims," explains Grace, "so ordinary records, showing risk assessments and training, are very important."

Categories:
Health, Safety, Professional Skills, Article, Enforcement (prosecutions), Lifting operations, Enforcement (prosecutions)

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