Setting the limits of stress

This month's decision by the Court of Appeal to overturn three occupational stress cases and quash more than £200,000 previously awarded in payouts seems to be great news for insurers. But opinion is divided as to what the long-term implications will be for the writing of employer's liability business, which covers work-related stress claims and, in particular, its impact on premium levels.

In the six years since John Walker made legal history by winning the UK's first workplace stress-related payout, the number of such cases being brought before the courts has rocketed to more than 6,000 per year.

According to the figures released by the TUC this month it helped members to bring 6,428 cases for workplace-related stress last year, compared with just 516 the year before.

Stress in the workplace is a serious issue; a survey carried out last month for Investors in People found one in five employees cited stress as the "single biggest barrier affecting their productivity". But employers don't see it as such a big problem. Only a small percentage say that it impacts their business.

In fact, so concerned were liability insurers by this sharp increase that it was cited as a reason for increasing premiums in 2001.

One of the key reasons the Court of Appeal gave in overturning three of the decisions was that the employees concerned had not raised the issue of their work-related stress with their employers until it was too late. This is a clear indication that in future any employee seeking redress through the courts must have first raised the issue with their employer, giving them a chance to address the situation.

TUC senior health and safety policy officer Owen Tudor says the unions would advocate that members speak up about unreasonably stressful working conditions.

"We will make sure our members know the Court of Appeal has urged them not to suffer in silence, but to get their complaints about bullying, overwork, inadequate training and unrealistic deadlines on record."

Tudor acknowledges that concern about adversely affecting career advancement and promotion prospects might be an obstacle to some stressed employees coming forward.

"It is always better to get it on record," says Tudor, "because then someone might do something about it and the more people who report it, the less likely it is to be a problem."

The Appeal Court's judgment seemed to give a virtual get out of jail - or at least litigation - free card to employers, who have in place a confidential counselling service for employees. This is evident from the summaries of the cases below.

Insurers agree with Tudor's advice that the decision should in no way cause employers be complacent about occupational stress.

Zurich UK Commercial casualty manager Jamie McNab says: "We work quite hard as a company to get the message across to employers that ultimately if you don't manage risk and reduce the frequency and severity of claims, it will come through into your claims experience and then you will pay a premium commensurate with the experience you are having. So if you want to keep your premiums under control take action."

It remains to be seen whether all or any of the points of the Appeal Court's ruling will be appealed, but most observers feel it is unlikely the decision will be challenged in its entirety.

Michael Pether, a partner in the London occupational disease unit of Berrymans Lace Mawer, believes the decision has gone a long way in clarifying the law in this area.

"It will reduce the number of cases being brought," he says, "but won't reduce meritorious claims as it gives clearer guidance, particularly on the issue of foreseeability."

In practice `foreseeability' is the legal test for judging whether or not an employer could, and should, have foreseen the effect the work environment was having on an employee. The Appeal Court said employers should not be automatically held responsible if an identical work environment adversely affected one employee if that employee did not take steps to alert his employer to the problem.

Gordon Hannah, general manager in charge of claims at the St Paul, one of the insurers involved in bringing the cases to the Court of Appeal believes the ruling is an excellent one for the insurance industry.

"It demonstrates the St Paul and other insurers worked together very well to choose the right cases to take to appeal," says Hannah.

"In the past out-of-court settlements were leaning towards the view that if it was perceived an occupation was stressful, such as the teaching profession, then it would be easier to find for the plaintiff," says Hannah.

The judgment has effectively reversed this trend in holding that no single occupation could be regarded as intrinsically more detrimental to mental health than any other.

Another key aspect of the decision for liability insurers is the Appeal Court's assertion that awards should be proportional.

In practice, what this will mean is that payouts for work-related stress should come down, as courts will be able to apportion the degree to which the workplace played a role the development of mental illness. The judgment also made it clear that pre-existing vulnerability to mental illness can be taken into account when deciding individual payouts.

"The employer will only pay for the harm attributable to his breach of duty at work," explains Hannah, "it would discount other stress pressures, which are clearly part of the picture, ie personal or financial ones."

Four law cases that changed the nature of stress claims
The growing tide of stress claims could be severely stemmed, and potentially millions saved by insurers as a result of the Court of Appeal decisions on 5 February in four work-related stress claims. Paul Hughes summarises the cases

Hatton. A teacher who had two months off work through domestic depression followed by a variety of (non-work related) absences. After returning to work he then had a breakdown. There was no evidence of any complaint, apart from some short staffing issues, but nothing exceptional. Although it was felt stress counselling was desirable, the court concluded that it was not needed in the teaching profession. Claim dismissed.

Barbour. Another teacher complained of working long hours following school restructuring. He had in fact taken on two roles to maintain his income. There was a general feeling of overwork among staff as a result of an OFSTED inspection, but nothing unusual. The claimant made some reference that his long working hours and responsibilities may be affecting his health. When symptoms developed he did not report them to the defendant. His GP diagnosed depression for which he was off work for two months. Upon return he quickly told his employer he could not cope, but it was felt that he might recover over summer. By September he did not and became worse, but did not consult his GP and did not mention any problems to his employer. He eventually stopped work. Claim dismissed.

Jones. The claimant succeeded largely on the grounds of bullying/harassment. She worked excessive hours and was doing the job of two to three people. She complained of overwork and health risks. Her line manager was unsympathetic and threatened that she might lose her job if she continued to complain. Despite this apparently being an extreme case, the Court of Appeal "concluded not without some hesitation" that the claim should succeed.

Bishop. He was factory worker whose employers restructured. He could not adapt to the changes. A colleague told the employer he felt the claimant was not coping. The claimant's GP said he should change jobs, but he took two weeks off before returning and having a breakdown. The court found the employer could not be in breach of duty for failing to dismiss him if he wanted to carry on despite advice given by his own doctor.

Paul Hughes is a partner in the special claims unit at Crutes law firm

A broker's checklist for rating the risk of stress
The Court of Appeal gave some general principles for guidance in future claims: