Society cannot afford rising negligence payouts

An amended judgment from the Court of Appeal on 10 October looks, on the face of it, as if it might present good news for clinical negligence defendants. But on closer inspection the position is not so rosy.

The judgement provides that a 10 per cent increase in general damages awards in personal injury cases will come into effect on 1 April 2013 and will not apply retrospectively to claims where conditional fee agreements already exist.

The 10 per cent increase is one of the changes that are to be made as a result of the Jackson recommendations on civil claims costs. It was left to the judiciary to decide how and when the 10 per cent increase would be applied, and on 27 August the Court of Appeal gave notice in the case of Simmons v Castle that it would apply in all cases where judgement was given after 1 April 2013.  

‘The cost of clinical negligence compensation awards is increasing much more steeply than wages or general inflation’

This came as an unwelcome surprise to all defendants, and the Association of British Insurers succeeded in challenging the judgement with the Medical Defence Union providing supporting evidence. We calculated it could add about £8m to the active cases we expected to have outstanding at 31 March 2013. This unforeseen and unexpected additional financial burden would have fallen on all the union’s members.

Looking at clinical negligence in the round, there would have been an even greater financial burden on the NHS Litigation Authority reserves, reflecting the massive volume of NHS claims for which it is responsible.

Negligence bill

Unfortunately the amended judgement on 10 October went only some way to alleviating this burden because the 10 per cent uplift will still apply to all claims, which are not funded by a conditional fee agreement, in the pipeline before 1 April 2013. So it will still add many tens of millions to the English clinical negligence bill in circumstances where these liabilities have been taken on and funded on one set of rules and these rules have now been changed with retrospective effect.

This is moving the goalposts after the ball has landed. The only way to fund these payments is going forward and that is unfair.  

The cost of clinical negligence compensation awards is increasing much more steeply than wages or general inflation. If nothing happens to halt this rise, the cost of indemnifying doctors will become unsustainable. This is not special pleading on behalf of a defendant organisation, like the Medical Defence Union, but intended to draw attention to a wider problem.  

Where care and treatment are provided through the NHS, the public end up funding these awards indirectly as taxpayers, and those who opt for private care will also pay directly through increased costs and insurance premiums. Some specialties may even be priced out of the private sector entirely because of indemnity costs, with the inevitable increased pressure on demand for the NHS. 

Interests of defendants

Without question, patients who are negligently damaged should be compensated, but only as far as that compensation is affordable. For the process to be fair, and for it to work in the longer term, the interests of defendants must be taken into account. 

Clinical negligence defendants are currently considering a consultation document that asks what methodology should be used to calculate the discount rate that applies to the future care element in personal injury claims where lump sum awards are made. These are cases where care packages are put together for severely damaged patients who, despite their injury, are expected to live for very many years and the damages awarded often amount to many millions.

‘We are in an economic downturn yet changes are in prospect that inevitably inflate claims costs in a manner which bears no resemblance to the financial expectations of the ordinary citizen’

The presumption is that the current discount rate may need to change, but any lowering of the discount rate would dramatically increase the sums defendants are expected to pay by millions. The consultation document itself states clearly, however: “The consequences for defendants of paying awards are not a matter to be taken into account in setting the discount rate.”

This cannot be right. We are in an economic downturn yet changes are in prospect that inevitably inflate claims costs in a manner which bears no resemblance to the financial expectations of the ordinary citizen. 

This is unsustainable and unaffordable.

Clinical negligence claims inflation is rising at 10 per cent per year, and last year the NHS Litigation Authority paid £1.2bn in compensation, a rise from the previous year’s figure of £863m. Its estimate of its total liabilities in 2011 was £16.7bn and that is an enormous amount of taxpayers’ money.

Claims inflation cannot continue at this rate simply because society cannot afford it. We need urgent reform of the claims procedure but this time it must take into account the cost to society of paying for claims. UK personal injury claims are now some of the highest in the world and we will all suffer for it if we fail to act now.

Dr Christine Tomkins is chief executive of the Medical Defence Union