Recommendations in PIC Report not Radical Enough

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18th September 2018

  • Report can’t explain why Irish awards so much higher than the UK
  • Disastrous if review of quantum passed to Law Reform Commission
  • Acknowledgement of excessive quantum is welcome

ISME notes the publication today (September 18th) by the Department of Business, Enterprise and Innovation of the report by Justice Kearns of the Personal Injuries Commission (PIC) which analyses general damages in Ireland. This is the second and final report by the PIC, and it benchmarks quantum paid in Ireland against that for analogous injuries sustained in other jurisdictions. While some of the commentaries and recommendations in the report are welcome, the Association highlights its concerns with the report.

Firstly, ISME would like to put on the record those observations in the second PIC report which we welcome:

  • The report formally acknowledges the very obvious fact that quantum paid in Ireland far exceeds that paid for comparable injuries in other jurisdictions. The analysis of awards paid in Ireland and the UK carried out by KPMG provides a stark comparison of the costs borne by policy holders in each jurisdiction
  • There is effectively zero law enforcement activity taking place against fraudulent claims. The PIC acknowledges that crime in this area is becoming more sophisticated, and is attracting criminals from outside the jurisdiction.
  • There is a sense of urgency evident in the report, suggesting that action is needed soon to stem the unjustifiable economic flows generated by excessive awards, false and exaggerated claims, and legal costs

However, we are most concerned that, despite this, the report’s recommendations not nearly radical enough. In particular, ISME expresses the following reservations:

  1. The PIC is unable to explain why Irish awards are higher than the UK (and other jurisdictions); yet it is commonly accepted in Ireland that the judiciary are the prime movers in the establishment of levels of quantum.
  2. Despite this, the PIC suggests that the judiciary, in the form of a yet-to-be-established Irish Judicial Council, should provide ‘guidance for judges in measuring general damages for personal injury…’ It further states ‘The PIC acknowledges that the judiciary are the correct source of guidance on the appropriate levels of damages and are empowered in reaching their decisions to take in factors such as the Court of Appeal decisions and the output of this report.’
  3. Thirdly, and most worryingly, the PIC essentially follows the line suggested in the second report of the Cost of Insurance Working Group (CIWG), that introducing legislation for the regulation of general damages should be a matter for consideration by the Law Reform Commission. Given the very significant program of law reform already under way by that body, this proposal is a recipe for kicking the insurance can at least four years down the road.

The PIC fails to justify its assertion that the judiciary is the logical agency to address the issue of excessive quantum. Firstly, it is judicial independence and discretion in the setting of general damages awards that is central to the problems we face now. To suggest that judges acting alone are the solution to the problem is simply illogical. ISME is not saying that judges should not be involved. Indeed we believe that an Irish Judicial Council should be an integral part of a benchmarking process to recalibrate general damages. But they should not be the sole arbiters of it, and they should not be in charge of it. Placing judges in charge of what is essentially a matter of public policy would be an abdication of legislative responsibility by Dáil Éireann. It would inevitably result in constitutional challenge by dissatisfied defendants (or plaintiffs) down the line.

The PIC rejects consideration of legislating to cap general damages, and concurs with the second report of the CIWG in stating that such legislation ‘would benefit from examination by the Law Reform Commission.’ ISME fundamentally disagrees with this assertion. The Supreme Court has already applied a cap on general damages for catastrophic injuries in the Sinnott .v. Quinnsworth Limited [1984] decision. The Oireachtas has already applied a statutory cap on the quantum paid in respect of fatalities in Section 49 of the Civil Liability Act 1961. The ‘hard cases’ are already catered for by law. We fail to understand how the PIC considers objectionable the extension of legislation to more minor areas of personal injury. It would have been useful in this regard if the PIC had commented on the constitutionality of the Civil Liability Act 1961, which is updated from time to time by secondary legislation alone. Advices already received by ISME suggest that the Law Reform Commission would be unlikely to object to legislation capping general damages, but such consideration might take years to materialise. This would be disastrous for policy holders.

We are unhappy with the manner in which the report handles the general topic of ‘care not cash.’ To the general reader, unfamiliar with the concepts of ‘general’ and ‘special’ damages, this report fails to acknowledge that the concern of ISME members (and indeed all policy holders) is primarily with the former, and not with the latter. General damages compensate for pain and suffering resulting from injuries sustained in an accident. Special damages compensate for actual expenses incurred as a result of an accident. These may include loss of earnings, medical expenses, out of pocket expenses and vehicle damage costs, and in serious cases may include loss of earnings, and future expenses. In a country like Ireland which lacks a free universal healthcare system, there will always be a significant cash element in special damages to cover costs of care. That is not at issue. What is at issue is the level of general damages paid. In claims paid below €100,000, special damages are dwarfed by general damages. With awards in the €75k-€100k bracket, special damages amount to no more than 15% of award. However, in awards of €5k-€15k, special damages are only 3% of award. Special damages are NOT the problem.

Regarding investigation and prosecution of false claims, the PIC is diplomatic in acknowledging the failures of our law enforcement system in tacking this white collar crime. To our knowledge, there has been one (1) prosecution under the Civil Liability and Courts Act 2004 for a fraudulent personal injuries action. This is absurd. According to Minister of State Michael D’Arcy, An Garda Siochána has the powers to tackle this crime but is not doing so. ISME does not concur. We view the investigation and prosecution of insurance fraud as a specialist law enforcement task, which is not part of the mission for the national police force. It should be allocated to a dedicated white-collar crime agency, with full powers of search, arrest and detention, similar to those powers invested in the Serious Fraud Office in the UK, or the Guardia di Finanza in Italy. Logically this should be overseen by the ODCE or the Revenue, but should be independent of the Department of Justice.

Commenting on today’s report ISME CEO Neil McDonnell said “We welcome the fact that PIC has acknowledged our disquiet at the unjustifiable level of personal injury pay-outs. We don’t believe its recommendations go far enough to address them. In particular:

  • We need Dáil Éireann to exercise its duty to legislate in the area of setting quantum. The Judicial Council must be an integral part of this process, but it cannot be theirs alone to control. We cannot wait upon the Law Reform Commission in this regard.
  • Pending formation of the Judicial Council, and as an interim measure, the Government should establish a formal framework, including PIAB and members of the judiciary, to suggest legislative caps in for the 2019 update of the Book of Quantum.
  • We need to get serious about the investigation and prosecution of false claims as a growing white collar crime. We need a specialist law enforcement agency to do this.

He added,

“We need effective and robust action now; the second and final report by the Personal Injuries Commission points the way, but along a route we consider to be dangerously prolonged. It is time for Dáil Éireann to step in and act.”