John Caulwell owns a busy Spar shop at 8 Upper O'Connell Street in Dublin. His difficulties with insurance costs began five years ago when someone slipped while hurrying out of his shop.
“The whole thing is on CCTV,” he says. “It was a bone-dry morning. This person ran into the shop, interrupted a member of staff who was serving a customer, and said: ‘Give me change for the bus.’”
When it was explained that it was shop policy not to do so, the person said “f**k you”, then turned to run out of the shop to catch the bus, which was just arriving. He slipped at the exit.
Soon after, a solicitor’s letter claiming compensation was received. “The insurance company settled it without discussing it with me.” After this, Caulwell’s premium increased to €12,000, from €4,000.
The shop currently has another two open claims against it, one arising from an alleged incident where a chair outside the shop was allegedly used in an assault, and a second about another alleged fall. In both instances, letters arrived making claims about incidents alleged to have occurred more than 30 days previously, so that Caulwell no longer had CCTV footage from the date in question.
Staff in the shop are asked to note accidents, but no member of staff had noted or could recall the alleged incidents. Caulwell has no idea if his insurance company will fight the claims. Meanwhile, his premium has shot up to €41,000 from €12,000.
“It came very close to closing me down. If there is another alleged incident and the premium goes up further, it will put my business in serious jeopardy. There is so much that is wrong with the system.
“There is a claims culture, no foal, no fees solicitors, insurance companies that are not prepared to fight cases, because they are afraid of the legal costs, and the size of the awards being made in the courts. It’s all stacked against the insured, against the retailer.”
Caulwell’s case sums up the frustration of many traders in the Republic, who feel that they are being punished for a growing claims culture here and what they consider to be excessive awards by judges.
High awards by judges are the cause of the rising level of insurance premiums that are putting businesses under pressure, and putting some of them out of business, according to Michael D’Arcy, Minister of State at the Department of Finance, who is central to the Government’s drive to get insurance costs under control.
His plan is that the establishment of a Judicial Council will allow the judiciary construct new guidelines for damages awards, recalibrating the levels downwards and thereby taking the pressure off premium increases.
This is the most important element “by a country mile” of the various initiatives being pursued with the aim of taking the pressure off business, according to the Minister.
Once the Judicial Council is established, he said, he will request the Attorney General, Séamus Woulfe, to ask the Chief Justice, Frank Clarke, to make the recalibration of award guidelines the first item on the agenda for the new council.
Politicians, however, are not in a position to tell the council what to do, because of the separation of powers rule that is at the heart of our democracy, the Minister accepts. Nor can they be sure that when such a council did consider the matter, it would introduce the level of recalibration that is being sought.
Research conducted by the Personal Injuries Commission (PIC) has concluded that the soft-tissue or whiplash type awards being made at district and circuit court level are more than four times those made by the courts in England and Wales.
“We would like to see the level of awards being recalibrated down to the levels of our nearest neighbours,” the Minister told The Irish Times. “If that doesn’t happen, then I believe action will have to be taken by the Oireachtas. The Oireachtas is not prepared to sit by and see these levels of awards continue costing jobs and businesses.
“It will be for the people to decide if it is right to cap the level of awards to ensure business can get premia at an acceptable rate. But I would prefer not to go in that direction.”
A Bill currently going through the Oireachtas, promoted by Fine Gael Senator Tony Lawlor, would cap awards in personal injury cases in an effort to reduce premium levels for motorists, businesses and farmers.
The Law Reform Commission is looking at how such a law could be constructed that would be safe from constitutional challenge, given the separation of powers rules.
The chairman of the PIC, former High Court president Mr Justice Nicholas Kearns, has pointed out that the system has long capped the level of award that can be made for the loss of a loved one due to the negligence of others (so-called solatium awards).
However, D’Arcy is of the view that the Judicial Council is the best route for reducing awards. The Department of Justice is currently working on an amendment to the Judicial Council Bill, that would be directly aimed at the recalibration issue.
A notable aspect of the Government’s current strategy is that it appears to presume that the judges, by way of the judicial council, will issue guidelines to the effect that they themselves should reduce by a massive amount the awards they consider appropriate when they are sitting in their courtrooms.
Relations between the Government and the judiciary took a bit of a knock earlier this year when it was decided that, pending the establishment of a Judicial Council, some type of interim structure could be put in place that could recalibrate the level of awards being made by the courts.
However, when a letter was sent by the Minister for Justice, Charlie Flanagan, to the Chief Justice making this proposal, it was leaked to the media at around the same time it was landing on Mr Justice Clarke's desk in the Four Courts. A dim view was taken of this.
"The Chief Justice said no, and in hindsight he was right. We'll do it the right way, and move on," D'Arcy told The Irish Times.
D’Arcy has expressed the view that the Republic has “the highest level of awards in the world” and that those awards “have come from the judiciary”.
“We had a system where no-one shouted ‘stop’” until two years ago, when the Department of Finance set up the Cost of Insurance Working Group, which he now chairs.
Others believe that the system is already adjusting itself, albeit not a quickly as business owners might like.
"Over the past five years or so, the Court of Appeal, led by Ms Justice Mary Irvine, has significantly reduced headline pain and suffering awards," said Eoin O'Dell, associate professor at the School of Law at Trinity College, Dublin. It should be noted that Ms Justice Irvine now sits in the Supreme Court.
These reductions on appeal of the size of awards made in the High Court have had the effect of reducing downwards the level of awards being made.
Meanwhile the Book of Quantum, drafted by the Personal Injuries Assessment Board (PIAB), which gives a value to different injuries using awards made by the courts, and serves as a guide to judges, has served to stabilise payout levels and prevent any upsurge.
O’Dell gives an interesting background to the divergence between Irish and English award levels.
Our neighbours removed the role of the jury from the making of personal injury awards long before we did, and during the interim the level of awards diverged, with Irish (jury-devised) awards growing at a faster rate than English (judge-devised) ones.
Although neither jurisdiction has used juries for quite some time now, the differential has remained. The interesting question, according to O’Dell, is whether juries are too generous, or judges are too mean?
A similar point is made by personal injuries solicitor and former president of the Law Society Stuart Gilhooly.
Why, he asks, when it is stated that the English courts are making awards that are as little as a quarter the size of Irish awards for soft tissue injuries, do we presume that the Irish awards are excessive and the English ones correct?
The vast majority of people who bring claims are genuine. It is the odd few who make it unsavoury for everyone else
As far as the High Court is concerned, he believes the system is “fixing itself” as rulings in the Court of Appeal reduce the level of awards in the High Court.
During the recent law term, he felt, the High Court personal injuries courts seemed quieter than they had for some time.
More cases are being dismissed, and the insurance companies are showing a better appetite for contesting dubious claims, Gilhooly believes. This has had an effect on the number of cases going to trial.
“The vast majority of people who bring claims are genuine,” Gilhooly said. “It is the odd few who make it unsavoury for everyone else.”
Another former president of the Law Society, James MacGuill, has also noted a change in attitude in the legal system.
“We have to warn clients that insurance companies are contesting more claims than they used to. If you make a false or exaggerated claim, then the whole thing can be thrown out. It’s a bit rough on the plaintiff at the moment.”
Rising insurance premiums are putting huge pressures on a wide range of businesses.
This week, RGDATA, which represents independent retailers, said emergency measures were needed “to prevent further business closures due to high insurance costs”.
It proposed that the Government introduce a super tax on insurance firms’ profits if premiums don’t come down sharply.
The slow pace of change is something that has been noted by Diarmaid Sheridan, a senior analyst with Davy whose work includes monitoring FBD, the only publicly quoted indigenous general insurer.
A recent note by Davy on FBD was positive about the company as an investment, but pessimistic about efforts to reduce insurance awards.
“Over two years after the Department of Finance launched the Cost of Insurance Working Group [CIWG], progress on the major recommended actions has been slow. A report resulting from the CIWG’s work found that the cost of soft tissue injuries in Ireland is 4.4 times higher than the UK, yet there has been little tangible change resulting from this finding. We feel that the CIWG’s eighth report [published on March 4th] overstates the progress made, with substantial offloading of goals to other departments or groups.
“We do not expect the CIWG’s work to have any notable effect on the claims environment in Ireland over our forecast horizon. A material reduction in the cost of claims would have a positive effect on FBD’s underwriting performance and solvency capital requirement.”
Combined operating ratio
The financial performance of FBD and other insurers can be assessed using a measure called the combined operating ratio, which looks at costs and claims expenses as a proportion of premium income. It does not show insurers in the Irish market having abnormal profitability, Sheridan said.
More recently, the project has been held back by the ongoing controversy over the Judicial Appointments Bill
Following the establishment of PIAB in 2004, the costs associated with insurance claims fell substantially, and insurance premiums subsequently fell as the industry reacted to the lower cost of claims, Sheridan said.
The purpose of a Judicial Council would be to promote excellence and high standards in the performance of judges, the effective use of judicial resources, continuing education, and respect for the independence of the judiciary. A first draft of a Bill to establish such a body was completed as far back as 2010.
More recently, the project has been held back by the ongoing controversy over the Judicial Appointments Bill, the controversial measure promoted by the Independent Alliance Minister, Shane Ross, who has in the past spoken of the "rotten system" for the appointment of judges.
The bill has been a cause of friction between the Government and the judiciary, and has been held up in the Seanad, where a number of members have been involved in a filibustering exercise.
The problem for business is that Ross has been insisting that the appointments legislation be dealt with before the Judicial Council Bill, while there are many in the Oireachtas, and in the judiciary, who are strongly opposed to the proposed new appointments regime.
However, D’Arcy said, the two pieces of proposed legislation have now been uncoupled, and the judicial council law can be passed by the summer, irrespective of what is happening with the appointments Bill.
We shall see.
Compo republic: counting the cost of injury claims
There were 350 personal injury awards made in the High Court in 2017, according to the latest annual report from the Courts Service, with the total paid out coming to €94 million. Of the awards made, 53 were for more than €500,000.
These figures do not include medical negligence awards, of which there were 50 in 2017, with the total sum awarded being €98.8 million.
Far more cases enter the High Court system than lead to recorded awards, with many cases being settled, and many more again not being proceeded with. In 2017, the total number of new cases registered was 8,909.
In the District Court, 204 of all the awards made in 2017 were for less than €7,500, while 11 were for greater than the €15,000 limit that usually applies in the court. The court can make awards for greater than this amount with the consent of the parties involved.
In the Circuit Court, where the award limit is €60,000, 405 of all awards in 2017 were for less than €15,000, 666 were for between €15,000 and €60,000, and four were for more than the €60,000 limit that normally applies.
The Personal Injuries Assessment Board (PIAB) was set up in 2004 to allow for uncontested personal injuries claims to be agreed without incurring the type of costs that are associated with the courts.
In 2018, PIAB made 12,112 awards, 70 per cent of which were motor, 18 per cent public liability, and 12 per cent employer liability injuries. The total value of the awards in 2018 was just under €300 million, with the average award being €24,649.
The highest award in 2018 was €908,749 relating to an employer liability case. Employer liability cases tend to be higher, reflecting the often more serious and complex nature of injuries suffered in the workplace.
The insurance industry does not have a total figure for all non-life payouts made in any year.
The PIAB operates from a Book of Quantum, which uses court awards, settlements, State Claims Agency cases and its own data to allocate values to the awards that should be associated with particular types of injuries. Courts are required to have regard to the values contained in the Book of Quantum.