The deafness avalanche needs a thought-out response
The size of the problem caused by the vastly increased number of noise induced hearing loss claims continues to be important to insurers. The most recently available data from the Institute and Facility of Actuaries back in 2012 showed that there were approaching 60,000 claims that year. Now, 2 years later, while the IFoA are in the process of collecting updated information, it would not be surprising to us if insurers are now facing 100,000 or more NIHL claims annually.
Against that background, the ABI’s Head of Motor and Liability, James Dalton, was surely accurate in referring to deafness claims last week as “the new cash cow for some claimant lawyers”.
Data as to increasing volumes from insurers
What is the latest evidence on the extent of the increase in deafness claims numbers? Recently published data from the Department of Energy and Climate Change in relation to NIHL claims brought by former miners shows that claims numbers increased by 380% between 2011/12 and 2013/14, albeit on a small sample, as actual numbers rose from 366 per year to 1,393. The Electrical Contractors’ Insurance Company reported recently that numbers had doubled between 2012 and 2013 with experience showing that the number would rise again for 2014 when the year was complete.
Aviva who have significant exposure in this area are reported as saying they have seen a 378% in claims numbers for NIHL, but this is over 4 years, from 2,400 in 2009 to 11,500 in 2013.
CRU data as to increasing volumes
CRU data obtained by Datamonitor shows a 252% in disease notifications between 2010/11 and 2013/14, up from 15,328 to 38,740. These are not all NIHL claims of course though they will be the majority of that sample. And the ABI have recently made reference to CRU data showing an increase in notified NIHL claims increasing from 1,000 in March 2012 to 3,500 in March 2014, a 350% rise in 2 years. But CRU data in relation to deafness cases needs to be read subject to the proviso mentioned below.
The proviso to any NIHL data from the CRU is that any such data will only be part of the picture as the position taken by insurers as to whether to report less than 50dB hearing loss claims to CRU will vary between insurers, and a report in a low level hearing loss claim is not in fact required by the legislation. But assuming we are comparing like for like as far as the systems of insurers are concerned the 350% percentage increase from the ABI figures seems to fit with at least some of the other data, and it’s clear the increase is very substantial.
Portal Company data
The Portal Co data is of little assistance in this area. It shows that 14,817 claims had been notified to the EL disease portal in the 14 months to the end of last month, the period the portal has been open so far. We have to accept that the first months’ worth of data from that source was lower than what will be normal as claimant lawyers rushed to submit claims before the end of July 2013 to be able to use the existing processes outside the portal, and this in turn led to there being fewer claims to submit once the portal opened. But even if we take last month’s number of new claims to the EL disease portal of 1,658 and annualise it, that only produces a figure of less than 20,000. And that is for all types of EL disease claims worth up to £25,000. So only a limited proportion of deafness cases are being submitted to the portal.
And another problem is that the portal is also unsuccessful in operating in such a way so as to retain within it the deafness and other disease claims which are lodged. The RTA portal has had a retention rate of 50% for almost all of the time it has operated. The retention rate for EL disease fluctuates widely because of the much lower use of it in comparison, but over recent months has been in the range between 0% and 20%. This suggests that for a successful portal-based process for this type of claim, revisions to what we have currently are required. Without them, the period taken to conclude this type of claim will be longer than it should be.
Avoiding the portal
One conclusion which can be reached from comparing (1) the number of all types of disease claims (including deafness) entering the portal with (2) the overall number of NIHL claims being made is that a substantial proportion of disease claims (including NIHL) being submitted these days by claimant lawyers are managing to avoid the portal. One way of doing this under the existing pre-action protocol is to claim against more than one defendant. There will be a temptation for a claimant lawyer to locate a potential second defendant, even if employment with that second defendant was short, to avoid the risk of fixed fees applying in the portal.
As things currently stand, insurers should look to identify unacceptable behaviour of this type and argue that those claims were in reality portal claims and should have gone forward as such. But that pre-supposes that the claim was meritorious and that a settlement could have been reached in the portal. Instead, reform in this area would allow a better approach.
Avoiding fixed costs
Costs are of course fixed where an NIHL claim submitted to the EL disease portal after the end of July 2013 concludes in the portal. But when the MoJ decided to exclude disease claims such as for NIHL from the part of the current fixed costs regime which applies where those claims drop out of the portal, and when set against the difficulties of retaining disease claims in the portal, perhaps the MoJ did not fully anticipate the response by claimant lawyers which has in fact taken place.
Set against the wider application of fixed costs to injury claims, which saw not only their extension to EL and PL accident claims and to higher value motor claims, but also the reduction in the level of fixed costs in the lower value motor claims, the claimant lawyer response has been a much greater interest in the remaining hourly rate type of cases. As part of this, there has been a significant switch in claimant lawyer activities to disease claims and especially NIHL claims.
High levels of costs
Again, data referred to by the ABI is a useful barometer of the costs problem. Their data shows in 2013 that average NIHL compensation was £3,100, while average claimant costs were £10,500. In other words, damages were less than a quarter of the amount handed over to the claimant and his lawyer when a NIHL claim does settle. When you compare this level of costs to the fixed costs now prescribed for other types of claim, you can see the behavioural incentive.
The increased interest in and pursuit of deafness claims by claimant lawyers means of course that to keep numbers up, many weak claims are being identified. Repudiation rates of 85% or so are not out of the ordinary. Claimant business models which are based on a significant proportion of these claims in fact succeeding may well be over-optimistic, Quindell are a case in point, who say not only that they are handling currently 44,500 NIHL claims, but also that they reject 75% of them after a vetting process which includes both an initial clinic and 2 hearing tests. To the extent that claimant law firms are taking on NIHL claims without the appropriate in-house expertise, or where the claims are weak, then they are storing up trouble for themselves in the months and years ahead.
But the recruitment trend goes on and confidence in exploiting what claimant lawyers see as a good opportunity remains unabashed. Roberts Jackson who are active in this area say on their website that they are in the process of recruiting 30 disease claims handlers, for not only NIHL cases but also for asbestos conditions, asthma, dramatis, VWF/HAVS, RSI and “cumulative back injuries”. There are many advertisements from other claimant law firms offering the opportunity for accident claims handlers to “retrain into industrial disease”.
A response to these factors
Firstly, the gaps in the current fixed fee regime for claims worth less than £25k need to be filled. Lord Justice Jackson is in favour of this. The deafness explosion is a good example of what happens if there are gaps in the reform process – claimant operations expand into those areas. Additionally, the incentive for claimant lawyers to avoid fixed fees in deafness cases by looking to sidestep the portal altogether or by ensuring that the claim drops out of the portal, either of which can deliver hourly rate costs for the lawyer, should be removed.
Secondly, revisions to portal processes are needed. The current process is effectively that which was introduced a few years ago for RTA claims, with precious few tweaks having been made for disease claims. A process more suitable for disease cases including NIHL is needed. We might well be looking at a changed process where the claimant’s medical evidence is put into the portal before the defendants decide on their position as to whether to admit the claim, in view of the overlap of the facts needed to decide on the issues of liability, causation and limitation.
And at the same time, why should claims with more than one defendant be excluded from the portal, especially if as the stats suggest there is abuse in this area, and the basis that the analysis above suggests a big disparity between the high number of NIHL claims being presented, and the much lower volume of them entering the portal?
Thirdly, it is right to recognise that there is an issue around the acceptability of medical evidence in NIHL claims. The problem is not specific to deafness, indeed it has recently been seen in whiplash. The concern is about the use of the hired gun, where the same expert will report for claimant lawyers in case after case in a situation where it is in the commercial interests of both doctor and lawyer for NIHL to be diagnosed. The situation can easily be reached where reports are regularly written reaching a diagnosis of NIHL in the expectation that claims will settle, sparing detailed consideration of the acceptability of the medical diagnosis that would happen at a trial.
The best solution might be to follow the reform being taken forward on whiplash, and to introduce the random allocation of potential medical experts to each NIHL claim, as part of an extension of the principle being established in whiplash claims to all other injury claims with a value of up to £25k, which of course is the level which is the limit of both the portals and the fast track.
This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.