Battle ready?

At first sight, one might think that personal injury work would be relatively unaffected by the credit crunch, in contrast to certain other types of legal work. Unlike ancillary relief claims in divorce cases, for example where Raymond Tooth was recently advising would-be divorcing wives in a Sunday newspaper to wait until the end of the recession or else face a reduced settlement from their newly impoverished partner, delay does not usually improve the prospects of a personal injury claimant; in fact rather the opposite in terms of witness availability and fading memories.

Whatever the economic circumstances, accidents will still happen and clients will still suffer injury and illness which appear to be the result of the negligence of others. But will more injured people think that litigation is a non-essential activity or will it be seen as a route to 'easy money'? And on the other side, will insurers be more ready to fight every point to avoid having to make a pay out or will they settle more cases early to hedge their bets and ease cash flow difficulties?

Claimants

The first point to make on the claimant side is that personal injury litigation is very rarely funded personally by the client, so the financial circumstances of the individual client are unlikely to have a direct impact on the volume of claims in a recession '“ except in so far as it may have some effect on the number of road traffic claims.

It was widely noticed, at the time of the very sharp increase in retail petrol prices last year, that the general public appeared to be travelling less by private car. One might expect that this would lead to a reduction in the number of road traffic accidents and the accompanying personal injuries, but so far there seems to be no statistical confirmation of this. The reduction in car usage turned out to be very short lived on its first appearance, so it is unproven whether there will be a significant reduction in the number of road traffic accidents leading to personal injury during the current recession.

In general, the likelihood that more claimants are going to be out of work or financially stretched than was formerly the case is unlikely to act as a deterrent to litigation. On the other hand, large-scale redundancies, especially those in traditional areas of manufacturing where personal injury claims are more common, are likely to bring about a significant reduction in the amount of personal injury work done by firms based in the areas where those redundancies occur because, with the factories closed, the industrial accidents will no longer be happening.

Employment liability cases are generally popular with solicitors because they are a steady source of work, often trade union funded and they tend to be more remunerative than other types of personal injury claim and have a high success rate for claimants. If unemployment continues to increase, it will surely have an impact on the overall number of employment liability claims of all kinds brought in the next few years for the obvious reason that there will be fewer people at the workplace who might suffer an accident (although it might be counteracted by the effect of reduced safety awareness on the part of surviving employers, as discussed later in this article when considering the defendant's perspective).

A spirited comeback

One area where the recession may have the perverse effect of bringing about an increase in the volume of personal injury claims is foreign travel litigation. After a long period when package travel holidays seemed to be going out of fashion, they are now making a spirited comeback. Between 2003 and 2007 the number of package holidays sold to UK customers remained constant at around 19 million per year, while the number of in-dependently booked holidays increased over the same period by more than 25 per cent from 21.7 million to 27.2 million.

In 2008 that trend was reversed, with 23 million package holidays being sold and fewer people choosing to make their own travel arrangements. In 2009 the reversal is clearer still: the comparison websites, Cheapflights and Travelsupermarket, recently reported 54 per cent and 26 per cent increases respectively in the number of searches this year on their website for package holidays. Meanwhile, TUI, the owner of Thomson and First Choice, has announced that its sales of all-inclusive holidays have increased by ten per cent in recent weeks.

The reason most often cited for this change is that clients like to have the assurance of fixing their costs in advance in a time of financial uncertainty, with the falling value of sterling often given as a second explanation. Most holidaymakers will have given no thought to the litigation implications of their decision, but the fact remains that, if they should suffer an accident or become ill as a result of food poisoning, they will be more likely to bring a claim against an English tour operator than they would have been to seek redress from a foreign hotelier; which would have been their only recourse had they booked the holiday independently and thus deprived themselves of the benefit of the provisions of the Package Travel (Etc) Regulations 1992.

Funding issues

Has the recession had any effect on litigation funding for claimants? A limited number of claimants will have trade union support or before-the-event insurance and public funding is available for many clinical negligence claims from the Legal Services Commission. There appears to be no evidence that these types of claims have been adversely affected by the recession, although it can be anticipated that both trade unions and insurers are likely to be increasingly wary of supporting claims where liability is uncertain. The majority of other personal injury claims will have to be pursued through conditional fee agreements.

There is anecdotal evidence that CFA insurers are becoming more choosy with the claims that they are prepared to support, perhaps as a result of chastening experiences at the end of cases when full recovery of costs has proved difficult. However, it is notable that the Compensation Recovery Unit, which has to be notified of all personal injury claims, has recently stated that the number of claims notified to it is roughly the same now as it was five years ago, which suggests that funding difficulties have not as yet acted as a deterrent for claimants.

Defendants

From a defendant perspective, one main development is likely to be an increase in claims or threatened claims. There could be many underlying factors linked directly or indirectly to the crunch. It may be simply because there are more accidents.

It is probable that increased redundan-cies and dismissals will have an impact on health and safety, for example. If the numbers working on a construction site are dramatically reduced, it is easy to see how this could have a knock-on effect on the availability of manpower to keep the site's access routes clear, and hence to an increase in the number of people involved in accidents at work. It will be interesting to see how successful employers and local authorities are at supporting a reduction in the steps taken by reference to reduced financial resources.

Or shortcuts may be taken which increase the risk. It would be interesting, if entirely speculative, to try to assess how many accidents happen over the next few years while times are tough and while people's attention is taken up with additional pressures. How many road accidents will happen with drivers distracted by worries about finances and the like?

On the other hand, the temptation to intimate a claim for an injury which resolved quickly and without incident and which might be worth £1,000 is surely going to be greater at a time of financial stress. A family that suffered a short-lived bout of food poisoning in Turkey could be tempted by the idea of trying to claw back the cost of the holiday, whereas previously it would have been considered just one of those things.

Accidents that might otherwise be passed off as a fact of life might lead to a more concerted effort to find someone to blame '“ particularly if the claimant has had to take time off work or incur expense when money is in short supply. An upsurge in small claims for minor injuries and upsets on holiday seems almost inevitable.

Driven to the wall

It is often the case that claimants who first visit a lawyer right at the end of, or even after, the primary limitation period of three years after a workplace accident, explain the delay by reference to loyalty to the employer until it became clear that the injury was serious.

No doubt many potential claimants simply prefer not to rock the boat. But employees who are feeling under pressure or undervalued or have already been given notice of redundancy may find that loyalty to their company no longer acts as a deterrent against bringing a claim, however spurious. It is not hard to envisage an employee of RBS or one of the other banks driven almost to the wall by the bad decisions of others feeling that they deserve a small slice of the pie. If one's former boss has walked off with a massive pay off, the temptation to press on with a claim may be that much greater.

Met with a barrage of small claims, defendants may well consider that it is more cost effective to pay them off to avoid costs spiralling out of proportion to the value of the supposed claim. Where the claim arises out of the closed environment of a workplace, for example, this could easily tempt others to 'give it a go' as well. Even if the claim is a complete try-on, defendants and their insurers are likely to end up spending time and money demonstrating this.

Surprise settlements

Once the claim is brought, defendants may find that settlements are easier to come by. There could be several reasons for this. On the one hand, the claimant may be in financial difficulties and an early settlement is preferable even if at a lower level. It may better serve defendants who suspect that their claimant falls into this category to resist requests for voluntary interim payments, or to keep them small, to keep the pressure on the claimant to accept a lower offer. On the other, it may be possible to exploit a claimant's fears (and those of his legal representatives) that turning down a lower offer could be a bad move '“ either because of the inherent risks of litigation or because of insolvency of the payer.

AIG (to use one example) may have been surprised by the settlements it has been able to achieve once its plight became public knowledge. Many claimants will have taken the bird in the hand rather than gamble on their insurers' solvency at trial months down the line.

If the insurer is in trouble, that may impact back onto the original defendant. In almost all cases, other than road traffic claims and claims where foreign law is applicable, the claimant will sue the tortfeasor rather than the insurer, since it is only in road traffic cases that a direct right of action exists under English law. That claim will not be affected by the financial concerns of the insurer or reinsurer. An employer may find itself encumbered with an adverse judgment without being able to pass it back to an insurer. For many, this could be the straw that breaks the camel's back for the survival of the company.

And it looks likely that, even if the insurer is not in trouble, financial issues will prompt an even more rigorous scrutiny of insurance policies and the means by which an insurer can avoid them. Defendants would be well advised to stick to the letter of the policy as regards notice and the like rather than end up in further litigation.

Lawyers

And finally, what about the lawyers? Many at the Bar are already suspecting that clients and solicitors are preferring to hold onto money in the short and even medium term rather than pay counsel's fees. Paying one's lawyer may well slip down the list of priorities for the moment. Lawyers cannot assume that, even if the tide of work continues, the income will necessarily follow for a while.

The only conclusion to be drawn at this stage is that the recession does seem to be having an effect on personal injury litigation, both from a claimant and a defendant perspective, but it is too early to say just how extensive that effect will be.