Clarity comes out of tragedy

On 19 August 2001, father of two, John Boultwood made the mistake of stumbling drunkenly in front of a car on Dock Road in Tilbury, Essex. When he turned to confront the driver, he had no idea he would soon become a link in a tragic chain of events that would cost him his life as well as destroy another man’s.

When he hammered the windscreen in anger, he could not have foreseen the driver would leap out to punch and kick him before driving to a nearby house, grabbing a knife and hunting him down. When Boultwood was stabbed seven times by Kerrie Gray, he never knew that a catastrophe two years earlier could be pinpointed as the moment that led to the fatal incident.

Before 5 October 1999, council worker Gray had led an uneventful life with no history of violence. He had a good relationship with his girlfriend and family, loved football and was a keen cook. But while travelling to work in west London by train he became trapped in the wreckage of the Ladbroke Grove rail crash that led to the death of 31 people and left 520 injured.

While Gray survived, he was left with post-traumatic stress disorder (PTSD) – an anxiety disorder that develops after the exposure to a traumatic event. This triggered an extreme personality change and a downward spiral of depression, emotional instability and uncontrollable bouts of anger that would culminate with his attack on Boultwood. It was the link between these two events that turned a personal tragedy into a potential nightmare for the insurance industry.

Diminished responsibility

In June, the House of Lords made a landmark decision ruling that Gray was not entitled to sue for damages relating to the killing, concluding a long-running legal battle that had major implications for insurers. After Gray pleaded guilty to manslaughter, on the grounds of diminished responsibility due to his PTSD, he was detained under the Mental Health Act for an indefinite period at a psychiatric hospital. He then pursued an action against Thames Trains and Network Rail Infrastructure arguing that he would never have committed the crime if he had not endured a mental illness as a result of the crash.

In June 2007, the High Court ruled against Gray’s entitlement to claim for loss of earnings both during and after his detention, general damages for his feelings of guilt after the killing and an indemnity against any claim brought by the dependents of his victim. However, a year later the Court of Appeal precluded the claim for general damages but held that Gray was entitled to claim for past and future loss of earnings, a decision that sent a shockwave through the industry.

But the rail operator and its insurers, believed to include AIG and Groupama, appealed the decision in the House of Lords. While the court accepted the role of PTSD in the killing, it held it was a “voluntary and deliberate act” and reversed the ruling. Nevertheless, insurers were left to mull over a “what if” scenario. For a while they had faced the distinct possibility that claimants could receive compensation as a result of events following a criminal act for which they claimed diminished responsibility.

During the legal proceedings, the rail operators had claimed liability for lost earnings up until the point when Gray committed manslaughter, depending on a centuries old legal maxim of ex turpi causa non oritur actio that stipulates a person cannot be seen to benefit from their own wrong doing. Until the Court of Appeal’s decision, the application of this basic principle had never been in question.

Compensated for a crime

“At the time when the Court of Appeal’s decision came out there was a lot of shock and horror from middle England that somebody could commit the crime that they did and then seem to be compensated for it,” says Groupama technical claims manager Karl Parr. “If you take a step back, you have to say that an individual must take full responsibility for the consequences of their criminal act.”

Hugh Mullins, partner at law firm Halliwells, who acted for the insurers of the rail companies says the ruling had saved the industry from a potential surge in similar cases. “The critical issue is that there are many thousands of claimants each year who are compensated for PTSD. If they were later to become involved in a criminal offence and that offence attracts a sanction, there remains a distinct possibility that they could have implicated PTSD in the criminal offence.”

Garwyn’s regional technical director Michael Maher agrees that an alternative ruling could have opened the floodgates. “It probably would have resulted in a wave of new claims from individuals who were alleging that there had been an event in their life that had led them down the path of criminal activity for which they then want to be compensated.” He explains this could ramp up considerable costs for the industry especially on time spent arguing the existence of a link between the negligent incident and a later criminal act. He adds it would provide a path that could attract opportunistic claimants. “I would expect you would get people trying to take advantage of this situation. It is very speculative,” he says.

Moreover, Parr says that if the House of Lords had upheld the Court of Appeal’s decision it could have led to the reopening of a number of resolved cases. “You have a situation where you have a relatively straightforward personal injury case that would run the risk of having to be reopened to re-examine facts and consequences. It could lead to potentially a vast number of reopened cases; extra work, extra challenges and extra litigation of cases that already had been settled.”

Others have welcomed a decision that acts as a bulwark to morally questionable motor insurance claims. Allianz divisional claims manager Roy Hebburn believes that if Gray had been entitled to claim, it could have provided an incentive to passengers that had been injured in stolen cars to seek compensation. “Most often you see this type of claim arising from motor accidents when someone has stolen a car; there is an accident and the claim is made through the Motor Insurers’ Bureau or the insurers of the car for the injuries sustained by the passenger. Those cases fail because they arise out of a criminal venture.”

Some, however, are less convinced the House of Lords has delivered the industry from a potential deluge of claims. “We do get cases where people have serious injuries that cause such significant psychiatric injuries that they could create a personality change. But thankfully, it is pretty rare so at any one time an insurer only has a handful of such cases,” says QBE strategic claims manager Mike Noonan. But he concedes that the decision has saved the industry an extra headache. “There are always a handful of claims. If it had gone the other way that handful of claims could have been reasonably substantial. It would depend on each individual claim but it would not be surprising if we were looking at £500,000 per claim.”

Ethical implications

Furthermore, many believe that aside from financial concerns, the House of Lords’ decision has far reaching moral and ethical implications. Maher believes the decision has safeguarded the fundamental principles of insurance. “The court has said that even though you have been through a lot, you cannot then lay subsequent misfortunes, subsequent bad behaviour, and judgment of errors at the door of the original event,” he says. “That would go against the whole nature of insurance which is meant to provide compensation for events that were not planned or premeditated. As the courts said, the stress disorder diminished Mr Gray’s responsibility but did not extinguish it.”

Overall, most agree the House of Lords ruling has led the industry out of some very murky waters. “I think what is important to the industry is that the decision has been made and normality and certainty has been restored,” says Parr. Noonan adds that a potential loophole has been closed: “It provides insurers with clarity; we are clear that we won’t have any litigation like this hanging over us. One of the benefits of the judgment is that if a claimant was thinking of going down a similar path, their legal advisers would probably deter them.”

However, there is sympathy for Gray, whose life was altered so tragically and irrevocably by the defendant’s negligence. “I think a lot of people would have had sympathy for his predicament because it was a horrendous event,” says Maher. But he adds: “The problem is when you open the doors a little, which is what the Court of Appeal did, it creates a situation where others may try and jump on that bandwagon and they may be far less deserving.”