FOCUS RISK MANAGEMENT THE QUARTERLY NEWSLETTER FROM GALLAGHER BASSETT

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1 FOCUS RISK MANAGEMENT THE QUARTERLY NEWSLETTER FROM GALLAGHER BASSETT ISSUE 48 OCT 2012 INSIDE BOOTS FAIL TO OFFER PROTECTION FOR MOTORCYCLING INJURY Court of Appeal rules on 10% uplift in general damages from 1st April 2013 WORK RELATED STRESS HEATING ENGINEER FELL FROM OPEN STAIRCASE EMPLOYERS' LIABILITY TRACING OFFICE WALES: THE ASBESTOS (RECOVERY OF MEDICAL COSTS) BILL The case of Simmons v Castle was heard in the Court of Appeal on 26 July The Court of Appeal was asked to approve a settlement following a motor cycle accident when Mr Simmons suffered personal injuries as a result of being knocked off his motorcycle by Mr Castle. The settlement assessed by the County Court was for general damages of 20,000 and special damages of 2,730, each figure to include an award for interest making a total award of 24,712. The terms of settlement went on to say that if Mr Simmons develops fulminant septicaemia resulting in a long term illness or death which causes significant long term loss of earnings he should be entitled to apply for further damages. The Court of Appeal upheld the settlement. This in itself is not particularly newsworthy. However, within the judgement, the Court of Appeal went on to outline the future approach to the measure of general damages in tort actions. recommended within the report are implemented through this legislation on the clear understanding that the judiciary would implement the recommended increase in damages of 10%. Within this judgement the Court of Appeal has, therefore, implemented that element of the Final Report on Civil Litigation relating to damages by setting the following guidelines: With effect from 1st April 2013, the proper level of general damages for: pain and suffering; nuisance; defamation; and all other torts which cause suffering, inconvenience or distress to individuals will be 10% higher than previously. It follows therefore that if the case being the subject of this appeal were to be heard after 1st April 2013 general damages would be 22,000 rather than 20,000. damages and the fact that successful claims, launched pre-april 2013 on a conditional fee agreement, will also be entitled to the success fee uplift. Unusually, the Court of Appeal has agreed to reopen the case, requesting that the ABI contact the Association of Personal Injury Lawyers and the Personal Injury Bar Association to add them to the list of parties as defendants. We will report further when the challenge is resolved but, in the meantime, claims handlers will need to consider whether to review the reserves held on general damages for cases not expected to be settled by April On the 1st April 2013 most of the reforms to civil costs as recommended by Sir Rupert Jackson in the Final Report on Civil Litigation Costs will be enacted by Part 2 of the Legal Aid, Sentencing and Punishment of Offenders Act The great bulk of the changes However in September 2012 the Association of British Insurers (ABI) indicated that it is to challenge the Court of Appeal ruling in Simmons v Castle, due to concerns that defendants could face a "double whammy" of costs as a result of the increase in

2 02 FOCUS RISK MANAGEMENT Boots fail to offer protection for motorcycling injury BLAIR v CHIEF CONSTABLE OF SUSSEX Court of Appeal May 2012 Mr Blair, a serving police officer with the Sussex Police Force, broke his leg whilst undergoing advanced motorcycle training. Part of the training involved him riding off road. He was the wearing classic clubman boots known as Alt berg which, at the time, was standard issue for the Sussex Police Force. During the off road training Mr Blair lost control of the motorbike and fell with the bike on top of his lower leg. Mr Blair brought a claim under the Provision and Use of Work Equipment Regulations 1998 alleging that the motorbike was unsuitable and, under the Personal Protective Equipment at Work Regulations 1992, on the basis that the boots were not appropriate for off road motorcycling. Although the claim was dismissed at the High Court, permission was, however, given to take the case to the Court of Appeal but only on the issue of whether or not the boots were effective in controlling the risk of injury. The Court of Appeal referred to the precedent of Threlfall v Kingston upon Hull City Council (Court of Appeal October 2010) (see Focus December 2010) which required a structured two step approach to the application of the Personal Protective Equipment at Work Regulations 1992 namely: 1. Identify the risk of injury. 2. Is the equipment provided, so far as is practical, effective to prevent or adequately control the risk of injury? The Court of Appeal determined that the Alt berg boots were not effective in controlling the risk of injury and the Chief Constable had not put forward evidence to say some other type of boot offering better protection would not be practical. On this basis the appeal was allowed. This case gives a good example on how the word practical is to be interpreted and the need for defendants to properly establish that there is no practical alternative if the protective equipment provided fails to prevent or minimise injury. Work related stress SAUNDERS v CHIEF CONSTABLE OF SUSSEX POLICE Court of Appeal July 2012 Mr Saunders was a police constable serving with the Sussex Police Force and, whilst on duty, he attended an incident involving a violent suspect during which the suspect was arrested. Mr Saunders subsequently discovered that the suspect had been carrying a knife and, as a result of this discovery, he started to suffer from flashbacks and nightmares regarding the danger that he had faced. Although he originally kept his feelings to himself, he was eventually signed off work and he fell into a depression. After six months, arrangements were made for Mr Saunders to return to work. His inspector knew of his mental condition and he was identified as an individual for Mr Saunders to contact upon his return. However, when Mr Saunders did return to work, his inspector was absent. Mr Saunders spent five days at work until, on the fifth day, he left work and drove to a lay-by where he attempted suicide. Mr Saunders sued the Sussex Police Force on the grounds that had he been provided with an appropriate point of contact upon his return to work, and/or had an appropriate point of contact been available, particularly on the day when he attempted suicide, he would not have suffered a catastrophic mental breakdown. The judge found that the Sussex Police Force had been negligent in failing to ensure that an appropriate point of contact had been available for Mr Saunders to speak to or contact upon his return to work. However, the judge found that, even had that point of contact been made available, it was unlikely that Mr Saunders would have spoken to anyone or raised his own concerns about his condition. Therefore, whilst finding negligence, the judge found that Mr Saunders had failed to establish that his condition was caused by this negligence. On this basis the judge dismissed the claim and, subsequently, Mr Saunders appealed. The appeal was dismissed. The Court of Appeal took the view that it was impossible to say that the judge had been wrong in his conclusions. The judge had considered the matter carefully and had given credible reasons for his conclusions. The judge had been entitled to find that there ought to have been an available point of contact. However, he had also been entitled to find that it had not been reasonable for Sussex Police to have provided a contact point for each and every moment that Mr Saunders had been at work and, in particular, on his final day at work when he had suffered the complete mental breakdown. A significant feature was that Mr Saunders case had been dependent on him persuading the judge that he would have acted differently if it had not been for the negligence of Sussex Police, and he had failed to do so. Although the appeal was dismissed, employers need to take account of the element of the judgement that found the police to be negligent, namely that any nominated point of contact should be available and, if not, steps should be taken to manage that situation.

3 FOCUS RISK MANAGEMENT 03 HEATING ENGINEER FELL FROM OPEN STAIRCASE HANNON v HILLINGDON HOMES LTD, High Court July 2012 Mr Hannon, a heating engineer, had been working for T Brown Group (TBG) which had a long-term maintenance contract with Hillingdon Homes Limited. The maintenance contract involved maintaining and repairing the central heating systems in Hillingdon s properties. Mr Hannon worked under contract for services with TBG who instructed him where to work. In February 2008, Mr Hannon was sent to a house to deal with a long-standing problem with the boiler. The boiler system needed to be power flushed. The property was a two storey property with the boiler located on the ground floor and the hot water cylinder on the upper floor. The two floors were connected by a flight of stairs. One side of the stairs was a wall and the freestanding side of the stairs had originally been fitted with a bannister, which had subsequently been removed by the tenant leaving an open staircase on that side. Mr Hannon had been working upstairs for some time when he heard a loud noise, possibly being a problem with the boiler. As he went down the stairs he slipped on the third stair up from the ground and toppled over sideways into the open plan area beside the staircase. He suffered a serious injury to his left ankle and brought a claim for personal injury against Hillingdon Homes Ltd in negligence and under the Defective Premises Act The latter claim was based on the defendant having a liability as landlord of the property. Hillingdon contended that it was not liable for the injury caused to Mr Hannon as: Mr Hannon should not have embarked on the power flush at the property given the absence of a bannister and the danger that its absence had given rise to and he had, therefore, been the author of his own misfortune; even if Mr Hannon was able to show that Hillingdon was, in principle, liable, he was guilty of a high degree of contributory negligence in undertaking the work and in the manner in which he had come down the stairs; Hillingdon was not negligent as it had a defence to the claim under the Defective Premises Act on the basis, amongst other things, that its obligation to repair as contained in the lease, was owed to the tenant and did not extend to repairs necessitated by the tenant's breach of covenant in creating the lack of repair in the first place; and Hillingdon had not been given notice of the defect by the tenant in a way which complied with the terms of the lease. The Court ruled that Hillingdon was liable because: 1. On the evidence, it had not been unsafe for Mr Hannon to embark upon the flushing operation needed to reinstate central heating in the property and his injury had not been caused by his unreasonable use of the stairs. The cause was the absence of bannisters on the open side of the staircase. 2. There was no suggestion that Mr Hannon had attempted to descend the stairs in an unduly risky or foolhardy manner and the slip he had experienced had been one that could well have happened even if he had not been descending the stairs in haste. Mr Hannon had not been guilty of any contributory negligence and any damages he was otherwise entitled to should not to be discounted. News in Brief RISXFACS.COM WEBINARS 3. The bannisters were an integral part of the staircase and fell within the scope of the repairing covenant of the lease. The absence of the bannisters had been a defect in the property which had been continuing because of the failure or omission of the party responsible for the repairs of the structure to replace it or to insist on its replacement by the tenant. Accordingly, there had been a relevant defect in the property and it made no difference to the existence of liability that the tenant had caused the defect, even where it was a breach of the terms of the lease. The Court felt that Hillingdon could have inspected and repaired the bannisters at any time over the period of the tenancy and was, therefore, liable for not carrying out those repairs even if it had not had notice of the defect. This decision has far reaching consequences for landlords in respect of liability for defects caused by tenants. In this case the only way Hillingdon could have been aware of the defect would have been to establish some sort of system of tenant reporting and inspection which would have made it aware of the hazard the tenant had created. Following on from previous successes of the Risxfacs.com training by webinar Gallagher Bassett are to continue to provide these once every two months. As before, clients will be able to join, listen to and watch a demonstration of the Risxfacs.com system from their own computers. The demonstration covers the basics all the way through to the creation of reports in Excel. The sessions will, therefore, be ideal for both initial and refresher training needs. Each session lasts up to two hours. Clients will be asked to log on through a secure website and dial a conference phone number. The next Risxfacs.com webinars will be held on: Thursday 25th October 2012, 10.30am Tuesday 4th December 2012, 2.30pm To join a Risxfacs.com webinar please submit your details on:

4 04 FOCUS RISK MANAGEMENT EMPLOYERS' LIABILITY TRACING OFFICE The Government s response to the consultation on plans to create an Employers' Liability Tracing Office and an Employers' Liability Insurance Bureau, as reported on in Focus April 2010, was published in July Claimant groups supported the establishment of an Employers Liability Insurance Bureau (ELIB) as a fund of last resort for claimants who cannot trace a relevant Employers Liability insurer. Despite these representations the Government has stated that it is not persuaded that a universal ELIB should be established. However, it proposes to set up a support scheme for those people with mesothelioma who were exposed to asbestos through their employers negligence and who remain unable to trace a liable insurer or employer. It also proposes introducing legislation to ensure that all insurers who write employers' liability insurance are required to become members of the Employers Liability Tracing Office (ELTO), established by the insurance industry on a voluntary basis in April 2011, and abide by its rules. Currently the voluntary ELTO: manages an online database containing all new and renewed employers liability insurance policies from April 2011; has a contract with each member insurer requiring them to upload data in a specific format and within a defined timescale; and meets the current requirements of the Financial Services Authority (the FSA has produced separate proposals about backfilling the database to November 1999). The legislation will mean that: all insurers will be required to comply (currently 99% of active employers liability insurers and most of those in run off have joined the voluntary scheme); there will be a common standard of evidence that a policy exists; and where there is a dispute over evidence the ELTO will establish a Technical Committee whose decisions will be binding. It is envisaged that this will further improve tracing by ensuring all insurers participate in tracing in a structured way and will result in more cases being tracked back to the insurance policy in force at the time of the exposure. The support scheme for sufferers of mesothelioma will be funded by a levy on insurers currently writing employers liability insurance. Payments from the scheme will be set at a level somewhere between that offered by state benefits and the average payouts in civil actions. This will ensure that there will still be an incentive for claimants to trace the relevant insurer to obtain full compensation. The new scheme will open to claimants who are diagnosed with mesothelioma on or after 25 July 2012 as a result of exposure to asbestos at work and who are unable to trace an employer or an employers liability policy to claim against. Further details have yet to be resolved, such as time limits, claims from dependants and how claims should be met when the scheme commences. WALES: The Asbestos (Recovery of Medical Costs) Bill Permission to place the above Bill before the Welsh Assembly (to be debated and potentially enacted as legislation in Wales) was granted on 16th May The intention of the Bill (which would be operative in Wales only, but applicable to asbestos victims treated in the NHS in Wales regardless of the geographical location of exposure) is to allow the Welsh NHS to recover the entire treatment costs due in respect of victims of asbestos related disease from the culpable party identified in respect of the exposure. Where a victim of an asbestos related disease has a valid civil claim against his or her employer or ex-employer, that employer or their insurers will be required to reimburse the NHS for the full cost of their treatment. The funds raised from this recovery process would then be paid into a specific fund set aside for the care of victims of asbestos related disease. This development follows in the wake of the Scottish Parliament s decision to reintroduce compensation (via legislation) for pleural plaques. Information If you would like further information on any of the articles contained in this issue, need guidance on whom to contact or just wish to pass on any comments, please call, Hannah Denne Telephone +44 (0) Hannah_Denne@gbtpa.com New Loom House 101 Back Church Lane London E1 1LU Telephone +44 (0) Facsimile +44 (0)

5 INTERVENTION CAN IT WORK ON LIABILITY CLAIMS? Expanding a product now commonly utilised within motor claims handling, insurers and claims handlers are exploring the merits of the intervention model for liability claims. The concept is simple; capturing and dealing with a fault claim early will mitigate the cost of a long drawn-out process with expensive legal fees. It is no secret that third party representation is a hugely expensive portion of the liability claims process. A sample study of retail clients found that third party solicitor fees accounted for between 50-60% of the overall liability claims spend. The concept of intervention focuses on those intending to make a claim for personal injury and encouraging them to do so without the need for solicitor involvement. The process may deviate from the traditional handling approach, but the cost savings associated can be significant. EARLY CAPTURE The essential element to this process is pro-activity, explains Simon Pemberton, Gallagher Bassett Sales Director: Responding to a standard letter of claim imposes a rigid structure on your handling options. By contacting the injured party before a formal claim is issued, you give yourself a greater degree of control over the process. In instances where liability attaches, the traditional adversarial approach to claims handling has produced little reward for defendants, even those with good defence procedures. The essential component for an intervention programme to work is that the organisation must have the ability to identify fault incidents and contact the affected party before they seek legal representation. Management and control equate to cost savings. IS IT APPROPRIATE? It s important to consider whether your organisation and the risks associated with it are appropriate for an intervention programme. Craig Keating, Gallagher Bassett s UK Claims Director, believes many organisations could benefit from an intervention programme. Organisations with an element of self-insurance and a large number of small claims are ideal for an intervention programme. Results have demonstrated that if the profile of the client fits, the savings achieved can be substantial. Intervention could be the answer to the increasing frequency and cost of public and employers liability claims in the UK. New Loom House 101 Back Church Lane London E1 1LU Telephone +44 (0) Facsimile +44 (0)

6 THIRD PARTY LEGAL COSTS The central reason behind the operation of an intervention programme is to attack the swelling costs of third party legal fees. There is no doubt that the legal profession provides a great service to unrepresented claimants on complex claims but the aggressive pursuit of lower value straight forward claims inevitably leads to questions regarding the economic value of the use of legal experts in these matters. Jack Straw MP has commented on the disproportionate levels of legal costs associated with liability claims, and Parliament is beginning to take an interest in the unrestrained culture of compensation. Of course, nobody will be denied access to justice. An injured individual will always be informed of their entitlement to seek legal advice. Also, there must be no suggestion that there is an attempt to unfairly reduce the damages element of the claim it s about cutting unnecessary costs incurred through litigation. REPUTATION PROTECTION There can be serious reputational fallout if small injury claims are handled badly, especially in today s age of social media. An intervention style approach enables an organisation to control the situation and appease the claimant, with the ultimate aim of maintaining their custom. There is a caveat to this however. It is imperative that by proclaiming a new claims-friendly position, the organisation does not become known as a soft touch and a haven for fraudulent claimants. This is where the importance of a vigilant claims handling team comes to the forefront. Full, accurate data capture with effective investigations will enable your claims handling team to robustly defend those claims where liability does not attach, or fraud indicators are highlighted. This is not an open door policy, merely a means of access to justice with lesser legal involvement. As Nick Bonser, Gallagher Bassett s Deputy Managing Director, says: Fundamentally, claims intervention is about providing access to justice and delivering swift, prompt and fair settlements. We should be able to achieve that without solicitors on a proportionate level of cases. This is a persuasive argument for relatively simple claims that do not involve long term injury. Some companies that have taken on this strategy have witnessed an overall costs reduction of 25-30% on like for like claims. LONG TERM THINKING Encouraging claims and watching claim numbers spike can be tough to accept for some, but the clear financial and reputational benefits of an intervention programme are hard to ignore. At the basic level, comprehensive incident reporting is the only real pre-requisite of adopting the strategy in some form. A well structured intervention programme takes an investment of time, with results beginning to show a year after implementation. However, the saving and reputation benefits associated with such a scheme will continue to reap rewards long into the future. New Loom House 101 Back Church Lane London E1 1LU Telephone +44 (0) Facsimile +44 (0)