Bill to counter the claims culture

The first clause of the Compensation Bill relates to the law of negligence and statutory duty.

The Better Regulation Task Force in its report 'Better Routes to Redress' made clear its view that a compensation culture does not exist. But it did find that the perception that it does exist can have a real and damaging effect on people's behaviour. That can be particularly significant in the area of activities provided by voluntary organisations and others.

Fears about possible litigation may be out of proportion and based on inaccurate perceptions, but they are very real. So there is a need to provide reassurance to those who are concerned, not only in the voluntary sector but elsewhere, about how the law in this country works.

Clause 1 doesn't concern or change what the standard of care should be, nor whether the defendant owed a duty of care to the claimant. It simply states that one of the

factors the court can take into account in deciding a claim is whether a requirement that the defendant should have done a particular thing would prevent or obstruct a desirable activity from taking place, or would discourage people from providing the activity.

This reflects the existing law, and guidance given by the higher courts for some time now and renewed in recent cases. It will help counter the view that organisations should cease activities because of a fear of litigation. And it forms a valuable part of the work the government is undertaking to tackle perceptions that lead to risk-averse behaviour and fear of litigation, and to improve the system for those with valid claims. It will support the other initiatives being developed as part of that work to improve public awareness and promote better risk management. And it will ensure that the law is widely known and applied.

We also accepted an amendment from the House of Lords that means an apology, an offer of treatment or other redress shall not of itself amount to an admission of negligence or breach of statutory duty.

Let me now turn to Part 2 of the Bill, which sets out the framework for the regulation of claims management services. Part 2 falls into three key areas:

1. The encouraging of frivolous claims - by raising false hopes about the compensation available, and through high pressure marketing techniques.

2. The misleading of consumers about the options for funding their claim.

3. The provision of poor quality advice where claims managers act directly for consumers.

Providing the regulator with continuing flexibility to adapt to circumstances will offer confidence to consumers and a proportionate and responsive framework for regulating the industry.

Our prime concern is to tackle the almost completely unregulated so called 'claims farmers'. We intend to exempt legal professionals and those who are subject to regulation by the FSA. But these exemptions will only apply to the extent that those concerned are already regulated in the provision of regulated claims management services.

This approach will avoid duplication in the regulation of claims management activities, although some organisations might need to be regulated by more than one regulator for different activities.

There will also be other exemptions. Individuals offering advice voluntarily, such as those working on a voluntary basis in a legal advice centre, are specifically excluded from the legislation. And we intend, through secondary legislation, to exempt charitable organisations and independent trade unions where they provide services to their own members. This union exemption will be made subject to compliance with a code of conduct to ensure that consumers are properly protected.

In due course we expect the regulation of claims management services to be integrated into the regulatory structure to be provided for by the Legal Services Bill.

But in the interim, the Secretary of State will regulate. A team of existing DCA officials will support him together with appropriate senior expertise, skills and experience brought in from outside the civil service.

We are in the process of finalising these arrangements. We intend to contract with a single trading standards team to help DCA carry out the authorisation, monitoring and compliance functions.

We also intend to establish a non-statutory regulatory consultancy group. This will be made up of representatives of the financial services and insurance industries, the legal profession, consumer groups and the claims management sector. It will help ensure we continue to engage fully with all those who have an expert interest in making a positive difference to standards in the claims sector. And we will be looking for nominations very shortly.

We will also be launching a formal consultation on the draft secondary legislation.

As you may be aware, the government has recently announced that a new provision will be added to the Bill to help sufferers from mesothelioma, who have been placed in great difficulty as a result of the House of Lords' decision in the case of Barker v Corus.

The Law Lords decided that where a worker had contracted mesothelioma after wrongful exposure to asbestos at different times by more than one employer, the damages were to be apportioned among the employers responsible for the wrongful exposure.

The government has announced that it is taking action to address this issue and help claimants suffering from this terrible disease to receive the compensation to which they are entitled as soon as possible.

Now let me turn to the draft Legal Services Bill. This establishes a Legal Services Board, a single oversight regulator to provide strong, consistent, and independent regulation, and creates a single and fully independent Office for Legal Complaints to address concerns about the quality, independence, and consistency of complaints handling by the legal professions.

The Legal Services Board & Office for Legal Complaints (the LSB and the OLC) will be demonstrably independent of both government and the professional bodies.