. 17
( 18)


drug injuries and so on.
In fact, a common pattern of reform is to institute limited no-fault schemes to
deal with particular classes of injured persons whose claims are pressed by politically
powerful groups, or whose plight for some reason attracts public attention and sym-
pathy. The basic question raised by this limited and piecemeal approach is that of
how the preference for the groups of injured who are singled out for special treat-
ment under a no-fault scheme (or, in the case of product liability, e.g., a strict liabil-
ity scheme) is to be justi¬ed in comparison with the position of less favoured groups
of injured persons. It may be that good (or at least popularly acceptable) reasons for
treating some groups of the disabled di¬erently from others can be adduced, but
serious attempts to do this are very rare. Even so, it seems that the likely direction of
future reform measures will be towards limited rather than comprehensive schemes.
In New Zealand, early intentions to extend the accident scheme quickly to other
sources of personal injury are unlikely ever to be ful¬lled;29 and in Australia, where
the path to comprehensive reform was seen as lying via transport accident schemes,
no such comprehensive reform seems likely.
One possible argument in favour of limited schemes is that by focussing on one
injury-causing activity (e.g. motoring), the scheme enables the cost of the activ-
ity to be fully internalized to that activity. But even in a comprehensive scheme
the funding sources could, to some extent, anyway, be organized to achieve this
Another important respect in which no-fault schemes are often limited is that
even in the area in which they operate (e.g. road accidents) they do not always entirely
supersede the tort system but leave the common law to operate side-by-side with the

24 ˜It is di¬cult to ¬t the concept of “medical misadventure” into the framework of what is essentially
a workers™ compensation scheme™: M.A. Vennell and J. Manning, ˜The Accident Rehabilitation and
Compensation Insurance Act 1992™ [1992] New Zealand Recent LR 1, 5“6.
25 More precisely ˜gradual process, disease or infection arising out of the course of employment™.
26 Although these ¬t somewhat uneasily within the scheme: Vennell and Manning, ˜The Accident
Rehabilitation and Compensation Insurance Act 1992™, 4.
27 T.G. Ison, Accident Compensation (London, 1980), 18“19; G. Palmer, Compensation for Incapacity
(Wellington, 1979), ch. XV. But care needs to be taken in reading these sources because the scheme
has been considerably altered in recent years. For an up-to-date account see S. Todd et al., The Law
of Torts In New Zealand, 4th edn (Wellington, 2005), chs. 2 and 3.
28 B. Rea, ˜Accident Compensation: A Cuckoo in the Sparrow™s Nest of Social Welfare?™ (1982) 4
Auckland ULR 235; Palmer, Compensation for Incapacity, 322“3; R. Stephens, ˜Horizontal Equity
for Disabled People: Incapacity from Accident or Illness™ (2004) 35 Victoria U. of Wellington
LR 783.
29 Indeed, the scope of the accident scheme was reduced in 1992.
Accident compensation in the twenty-¬rst century 471

no-fault scheme. Sometimes tort and no-fault rights run in parallel, with set-o¬ pro-
visions to prevent double recovery. Indeed, we have already seen that under the
present law in Britain, there are rules determining when and to what extent no-fault,
¬rst-party insurance and social security bene¬ts are to be set o¬ against tort damages.
The proposals for an NHS Redress Scheme discussed earlier provide for such a type
of ˜dual system™.
Another type of dual system provides for no-fault bene¬ts up to a ceiling, and
then tort rights are available to top the compensation up to the level of ˜full com-
pensation™. Such dual systems have several disadvantages. First, they require the
whole structure of tort law and third-party liability insurance, with all its ine¬-
ciencies and costly waste, to remain in existence. US experience shows that schemes
which limit rights to sue in tort cut costs much more e¬ectively than schemes con-
taining no such limitation.30 Secondly, since the no-fault bene¬ts are subject to a
ceiling, those who su¬er most from the faults of the retained tort system are the
long-term seriously disabled, who must rely on the common law to bring their com-
pensation up to an adequate level. Conversely, those best o¬ under a dual system are
the less seriously injured, who can expect to receive compensation for most or all of
their economic losses under the no-fault scheme, and who also enjoy the option of
using the tort system to secure compensation for non-economic losses. The long-
term disabled, by contrast, may have di¬culty obtaining adequate compensation
even for ¬nancial loss, despite using both elements of the dual system. Dual sys-
tems, therefore, tend to be costly, to preserve all the ¬‚aws of the tort process and to
disadvantage those most in need relative to those less in need.
A case in favour of a dual system might be based on arguments about ˜justice™.
From this perspective, a dual system has the advantage that it embodies princi-
ples both of individual and of social responsibility.31 Thus a dual system might
be constructed which would ensure the victim adequate ¬nancial support from a
no-fault fund, but also allow them to sue the tortfeasor for damages for intangible
loss as an expression of the latter™s individual responsibility. The desirability of
retaining the element of individual responsibility is established, it is said, by the
fact that criticism of the fault principle is not directed at the validity or accept-
ability of the ideals or objectives it embodies, but at the law™s inability to achieve
those objectives.32 There may also be a political case in favour of dual systems. In
New Zealand, the ˜price™ of the abolition of tort rights was that bene¬ts under the
Accident Compensation Scheme were to be broadly commensurate with those in
tort, at least so far as ¬nancial losses were concerned. The high level of bene¬ts

30 US Department of Transportation study, State No-Fault Automobile Insurance Experience 1971“77
(Washington, 1978); J. O™Connell, ˜Update on the Surveys on the Operation of No-fault Auto
Laws™ [1979] Insurance LJ 129.
31 L. Klar in F.M. Steel and S. Rodgers-Magnet eds., Issues in Tort Law (Toronto, 1983). See also
L. Klar, ˜The Osborne Report: “No” to No-Fault™ (1989) 68 Can BR 301; R. Mahoney, ˜Trouble in
Paradise: New Zealand™s Accident Compensation Scheme™ in S.A.M. McLean, Law Reform and
Medical Injury Litigation (1995), 32“4.
32 Klar in Steel and Rodgers-Magnet, Issues in Tort Law, 33.
472 Chapter 18

both creates anomalies with other social security bene¬ts and makes the scheme
expensive; and the expense has inhibited the extension of the scheme to disease.
The retention of tort might make it possible to introduce a more comprehensive
no-fault scheme with relatively low ¬‚at-rate bene¬ts. This would give all the dis-
abled a ¬‚oor of support but also enable those who wished (and were lucky enough
to be able to make a successful tort claim) to gain higher tort bene¬ts.
On balance, however, the case for a dual system is not convincing. The fact that the
objectives of the tort system might be thought desirable does not justify retention
of a system which achieves those goals so ine¬ciently, and in many respects not at
all. The political point could be met by a two-tier, no-fault system in which relativ-
ely low ¬‚at-rate bene¬ts were ¬nanced by compulsory levies and contributions and
higher bene¬ts for those who desired them could be bought by higher voluntary
contributions, or by the purchase of insurance in the commercial market.
The basic policy choice between comprehensive and limited reform is a choice
between viewing the position of victims of personal injuries in terms of social
welfare, on the one hand, or in terms of legal rights and duties, on the other.33 The
¬rst perspective leads to attempts to integrate compensation for personal injury into
the social welfare system of compensating for those misfortunes for which the State
takes some responsibility. It by no means follows that all victims of misfortune will
be treated in the same way by the social welfare system, and that no distinctions will
be drawn on the basis of type and source of misfortune. But the comprehensive
approach does involve opting for social welfare techniques, and espousing as an
ultimate goal an integrated system of social welfare to deal with all cases of ˜social
misfortune™ on the basis of need. The second perspective, on the other hand, tends
to start with the existing pattern of legal liability for personal injuries, and to con-
centrate on improving existing legal mechanisms so that they deliver compensation
to more of those for whom it is intended (e.g. the 95% of accident victims (more or
less) who at present receive no tort compensation). This approach may lead simply
to procedural reforms, or to reform of the rules governing assessment of damages,
or it may lead to no-fault schemes, such as road accident schemes, designed to use
the resources presently poured into compensating personal injury victims more
e¬ciently to provide more victims with tort-type bene¬ts.34 The two approaches are
quite di¬erent, and the second is much more prevalent than the ¬rst.

18.2.3 Preferential treatment
An important feature of the present law, of avowedly limited reform proposals, and
even of proposals and schemes designed by reformers with comprehensive reform
as their ultimate goal, is that some groups of disabled people receive better treat-

33 Palmer, Compensation for Incapacity, 93.
34 This last approach favours those disabled people who already bene¬t from the tort system and
does nothing for victims of disease, for example: Stapleton, Disease and the Compensation Debate,
Accident compensation in the twenty-¬rst century 473

ment than others. The extreme egalitarian position would be that the only criterion
of compensation should be need, and that like needs should be treated alike what-
ever their source. We have seen at various points how, in practice, particular groups
receive preferential treatment despite the fact that their needs are no di¬erent from
those of less favoured groups. We have, for example, noted the industrial preference
in the social security system; in chapter 1 we discussed the preferential treatment
accorded to the victims of injuries attributable to human as opposed to natural
causes. The commitment of tort law to the principle of full compensation and to
the hundred-per cent principle produces a preference in the law for the victims of
injuries as opposed to other misfortunes such as unemployment. We have also noted
that, in practice, tort law makes it easier for the victim of traumatically caused
injuries to recover compensation than for the victim of illness and disease attribut-
able to human causes “ what one writer has called the ˜accident preference™.35
This last preference is also present in the New Zealand accident compensation
scheme,36 and in that context the preference is partly the result of the fact that dis-
eases are a much more common source of physical incapacity than accidents; and
so the cost of a scheme which covered the former as well as the latter would be very
much greater than that of a scheme covering accidents only. For example, the
Australian Committee of Inquiry into a national compensation scheme found that
a scheme covering accidents, congenital incapacity and sickness would cost about
¬ve times as much as one covering accidents only.37 On the other hand, this estim-
ate takes no account of the cost of existing schemes which compensate disease
victims (such as occupational sick pay and personal insurance) and so does not rep-
resent the additional cost of a disease scheme.38 Moreover, the proposed Australian
scheme provided high-level, earnings-related bene¬ts, which added considerably to
the cost of the scheme. Nevertheless, the argument based on cost is a potent polit-
ical weapon available against the introduction of comprehensive compensation
schemes covering illness and disease as well as accidents. Opposition to the aboli-
tion of tort rights tends to be bought o¬ by providing generous bene¬ts, but when
applied to the sphere of disease as well as accidents, the high bene¬ts generate new
opposition because they make the scheme very expensive. Thus it can be seen that
the shape of reform can be in¬‚uenced as much by political pressures as by rational
arguments of principle or policy.39
Finally, it is worth noting the point that every proposal or scheme for strict lia-
bility or no-fault compensation in a limited area creates a preference in favour of
some victims of personal injury against others. The purpose of pointing out that
the law and most reform proposals contain such preferences is not to show that

35 Stapleton, ˜Compensating Victims of Disease™.
36 And is likely to remain so: Sir Geo¬rey Palmer, ˜The Future of Community Responsibility™ (2004)
35 Victoria U. of Wellington LR 905.
37 Australian Committee Report, para. 483.
38 Ison, Accident Compensation, 30“1.
39 Palmer, Compensation for Incapacity, 204“5, 338.
474 Chapter 18

preferential treatment of selected groups is necessarily unjusti¬able. It may be pos-
sible to produce more or less convincing arguments in favour of preferential treat-
ment of various groups. The point to make is simply that it is important to
recognize and to seek to justify preferential treatment, in order to ensure that any
scheme proposed or put into e¬ect re¬‚ects an acceptable set of priorities for the use
of social resources. For example, some good reason might be found for compen-
sating injury victims for ¬nancial loss more generously than victims of redundancy,
but we should be clear what that reason is before we institute or continue a system
which gives e¬ect to that preference.

18.2.4 Assessment of compensation
As we have seen, the tort system seeks in theory to compensate claimants for 100%
of their ¬nancial losses, and to provide monetary compensation for a wide variety
of non-economic losses; it also purports to provide compensation for the full period
of the claimant™s incapacity or the full period during which they su¬er loss. In other
words, the tort system attempts to restore the claimant to the ¬nancial position they
were in before the injuries were su¬ered (restitutio in integrum). To this end it pro-
vides fully earnings-related income replacement (˜standard of living™ bene¬ts) for
earners, and income for some non-earners (e.g. domestic carers) on the basis of the
notional market value of their services; and full compensation for expenses incurred
as a result of the injuries. The tort system also provides compensation for the dis-
ability itself “ pain and su¬ering and loss of amenities. In order to do all this the tort
system of assessment has to be highly individualized, and so it is costly and slow.
The features of the tort system of assessment represent a maximum, and reform
proposals usually involve some sort of trade-o¬ under which more people are com-
pensated than by the tort system, but at a lower level of bene¬ts. For example, one of
the reforms recommended by the Pearson Commission was that no damages ought
to be awarded for non-pecuniary loss su¬ered in the ¬rst 3 months after injury. Since
the vast majority of accident victims recover fully in this period without su¬ering any
¬nancial loss, this proposal, if implemented, would remove from the tort system a
large number of minor cases, and free considerable resources to compensate the
more seriously injured or those who su¬er permanent disability but currently receive
no, or inadequate, tort damages. Again, social security systems usually begin paying
income-replacement bene¬ts only after the claimant has been o¬ work for a ¬xed
number of days. One writer has criticized the New Zealand accident compensation
scheme for concentrating too heavily on short-term disabilities by paying generous
income-related bene¬ts for merely temporary or short-term incapacity.40
The common law™s willingness to compensate for non-pecuniary losses is usually
not shared to the same extent by other compensation systems.41 The disability pen-

40 Ison, Accident Compensation, 31, 74“5, 188.
41 The Pearson Commission estimated that two-thirds of all tort payments are for non-pecuniary
loss. Under the New Zealand scheme for the year ended 31 March 1978, compensation for non-
pecuniary loss amounted to NZ$18.1 million, while total compensation paid was NZ$89.1 million
Accident compensation in the twenty-¬rst century 475

sion available under the industrial injuries scheme is a form of compensation for
non-pecuniary loss, but it is peculiar to that scheme and is part of the industrial
preference. The unemployed, for example, are not compensated for the pain and
anguish of being out of a job for a long time. And when compensation is given for
non-pecuniary loss, it is usually calculated on a tari¬ basis so as to reduce adminis-
trative costs. The major arguments against compensating for disability as such are
that when resources are limited (as they always are), it is more important to com-
pensate for pecuniary than for non-pecuniary loss; and that disability is not neces-
sarily related to income loss. For example, a university professor who loses a leg may
su¬er no income loss, whereas a police o¬cer similarly injured might su¬er con-
siderable income loss. The second objection is particularly important when disabil-
ity is used as a measure of compensation for future pecuniary loss42 (the main
advantage of doing this is that it removes the need to calculate future pecuniary loss
which, as we have seen, is a very di¬cult and speculative operation). But even if
compensation for disability is additional to compensation for loss of income, the
low earner might feel aggrieved if, in addition to receiving earnings-related com-
pensation for lost earnings, the higher earner also receives the same amount as the
low earner for disability.
Non-tort systems of compensation often impose quantum limitations on recov-
ery for pecuniary loss. For example, most social security systems compensate for
only a proportion of lost earnings in order to encourage return to work. At the
other end of the scale, ¬rst-party insurance policies often require the insured to
bear the ¬rst £X, or a certain proportion, of their ¬nancial loss, in order to dis-
courage small claims. Strict liability schemes sometimes impose ceilings on the
amount individual claimants can recover, and on the aggregate amount which can
be recovered from a particular defendant in relation to a particular incident or a
particular period of time “ such provisions are designed to prevent very risky but
socially desirable activities, such as the development and marketing of drugs, from
being burdened with such a level of liability that they cease altogether, or are
reduced below a socially desirable level.43
In relation to income replacement, non-tort systems of compensation are often
less committed to providing income-related bene¬ts than is the common law,
although many people would now subscribe to the view that the State has a vital
role to play in providing income-related insurance schemes.44 The chief reason for
this attitude to income-related bene¬ts is that they are regressive in e¬ect (that is,
they distribute wealth from the poor to the rich) unless such bene¬ts are funded

(Palmer, Compensation for Incapacity, 243). In 1991 more was paid out in non-pecuniary loss
(NZ$259 million) than for medical and hospital treatment combined: G. Palmer, ˜New Zealand™s
Accident Compensation Scheme Twenty Years On™ (1994) 44 U of Toronto LJ 223, 249.
Compensation for non-pecuniary loss under the NZ scheme was abolished in 1992 and was
replaced by a modest pension related to degree of disability.
42 Stapleton, Disease and the Compensation Debate, 166“7.
43 Fleming, ˜Drug Injury Compensation Plans™, 311“12.
44 Ison, Accident Compensation, 187“8, 189.
476 Chapter 18

in a fully income-related way “ which may not be politically feasible. In this respect
the tort system is highly regressive because third-party liability premiums are not
at all related to income, while tort bene¬ts are fully income-related. On the other
hand, the fact that the social security system has elements of income-relatedness
in it shows that earnings-relation is not perceived as being inconsistent even with
a social security scheme of compensation. Indeed, income-relation is one of the
basic principles of the New Zealand Accident Compensation Scheme. Hostility to
earnings-related social security bene¬ts is based on cost as much as on the ideo-
logical consideration that earnings-related bene¬ts ought to be bought by indi-
viduals in the private insurance market.
Other expressed objections to income-related bene¬ts are that they divert
resources from areas of greatest need, and that even if they are progressively funded,
they re¬‚ect existing inequalities in patterns of remuneration in society.
Another respect in which social security systems restrict entitlement to bene¬ts
is by means-testing. If the basis of entitlement is need, then collateral sources of in-
come are relevant. The common law, on the other hand, compensates for losses, and
the fact that even though a person™s income has been reduced, they are not actually
in need, is irrelevant in assessing common law compensation. Bene¬ts under the New
Zealand scheme are not means-tested, and this has led one writer to observe that the
scheme is not designed to meet need or to help the poor, but to protect against
¬nancial inconvenience even people who are in no real sense in need.45
A ¬nal point to note is that the question of assessment of bene¬ts is separate
from that of the basis on which bene¬ts are paid. For example, negligence as the basis
of entitlement could be replaced by a strict liability or no-fault regime in a particu-
lar area without tort principles of assessment being abandoned in that area. Thus,
additional compensation under the CICS and compensation under Part I of the
Consumer Protection Act 1987 are assessed according to tort principles.46 Indeed, the
whole basis on which the New Zealand Accident Compensation Scheme was
designed was that community expectations generated by the principles of assessment
at common law ought to be met in the no-fault scheme by providing bene¬ts broadly
commensurate with those available in tort. This approach was taken partly to
increase the popular and political acceptability of the reform; and also because it was
perceived that the tort system had created ˜vested rights™. The argument based on
˜vested rights™ is a very weak one for a number of reasons. In the ¬rst place, relatively
few injured people actually receive tort compensation. Secondly, the rights in ques-
tion are only ˜inchoate™ or potential rights to claim and be awarded compensation in
the event that an injury is su¬ered. The use of the word ˜vested™ tends to conceal this
fact. Finally, the ˜vested rights™ argument, carried to its logical conclusion, would rule
out any reform of the law which deprived anyone of a potential right to some bene¬t
or to compensation.
45 J.A. Henderson, ˜The New Zealand Accident Compensation Reform™ (1981) 48 U. of Chicago LR
781, 788“9.
46 But total compensation payable under the CICS is capped at £500,000.
Accident compensation in the twenty-¬rst century 477

In the result, some of the cost savings which could be achieved by introducing
¬‚at-rate bene¬ts and less individualized assessment rules are not realized in
schemes which are so designed as to preserve ˜vested tort rights™. And, contrary to
what might at ¬rst be expected, even a commitment to a State-run comprehensive
scheme is not always accompanied by a commitment to ¬‚at-rate income replace-
ment and abolition of compensation for non-pecuniary losses.

18.2.5 Funding
We have noted several times throughout this book that the question of how a system
of compensation is funded can be decided quite separately from the question of
what bene¬ts it provides and to whom. So, for example, it is possible to design the
bene¬ts side of a system to give e¬ect to some notion of ˜just compensation for
losses™ and to design the funding side to achieve goals such as accident prevention
or income redistribution.
A number of basic funding issues deserve mention. The ¬rst is a question of
approach: one approach is to construct an ideal scheme and estimate its cost,
leaving it to politicians to decide whether the cost is worth the bene¬ts. A danger
here is that if a scheme is indivisible, and thought too expensive, it may fail com-
pletely. To meet this eventuality it may be possible to construct the ideal scheme
in steps, which could be implemented separately as funds became available. For
example, the original intention in New Zealand was eventually to extend the acci-
dent compensation scheme to diseases. The risk in this course is that once the
¬rst step has been implemented, the momentum for reform will decrease and the
later stages might never be implemented.47 This sort of global approach tends to
be associated with comprehensive reforms which aim to cover areas not previously
covered by an e¬ective compensation scheme.
A very di¬erent approach involves designing a scheme that seeks to rationalize
and make better use of already available resources, and even of present funding
mechanisms. For example, the short-lived New South Wales transport accident48
scheme was seen by its designers as particularly attractive because it was planned
to cost no more than the existing tort-cum-liability-insurance system, and the
funds could be collected in exactly the way they were under the tort system, that is,
by liability insurers. Such an approach sees the reform task as being to streamline
and improve the present system rather than to look at the issue of injury compen-
sation in terms of wider social issues about the community™s responsibility for the

47 One of the aims of 1992 amendments to the New Zealand scheme was ˜to prevent creep in cover-
age towards disease™: Palmer, Compensation for Incapacity, 243, 245“6.
48 The scheme was not a no-fault scheme but a fault-based scheme in which the issue of fault was
decided administratively by a government agency. In other words, in terms of decision-making,
the scheme was rather like the Industrial Injuries Scheme. The attraction of such a fault-based
scheme is that by reducing administrative costs a greater proportion of accident victims can be
compensated without an increase in total expenditure. At the same time, perceived advantages of
a fault-based over a no-fault system are not sacri¬ced.
478 Chapter 18

A second major funding issue is whether the scheme is to be State-run or based
on the market. The chief importance of this choice is that a market-based system
will be funded on the simple principle that a person should pay for the damage they
cause (if a liability scheme is in issue), or that a person should insure against their
own losses (if a no-fault or ¬rst-party insurance scheme is in issue); whereas a
State-run scheme can accept this insurance principle or modify it to achieve other
social objectives, such as redistribution of resources to the poor. So, whereas in a
market-based system insurance premiums would ideally be based on a person™s
injury record (in a no-fault system), or on a person™s safety record (in a liability
system),49 in a State-run system contributions could be based on income in such a
way as to be distributionally regressive, neutral or progressive, according to the
wishes of the political framers of the scheme.
A third issue is whether the scheme is to be fully funded or funded on a pay-as-
you-go basis. In a fully funded scheme the contributions in any one ¬nancial year
have to be su¬cient to cover all claims made in that year in full (even if the claim
will be paid out periodically over a period of years, or in one lump sum but not for
several years™ time). In a pay-as-you-go scheme, contributions in any one year need
only be su¬cient to cover amounts actually paid out in that year. Thus in a fully
funded scheme, but not in a pay-as-you-go scheme, substantial reserves have to be
built up. In theory, premiums under a fully funded scheme can be lower than under
a pay-as-you-go scheme because the reserves can be invested to produce income out
of which future payments can be partly met. But when there is signi¬cant in¬‚ation
this advantage is often illusory because returns on investments may not keep pace
with in¬‚ation.50
The choice between these two methods of funding is not unrelated to the last
point, because the realities of the private insurance market and the legal accoun-
ting requirements placed on insurance companies require them to run fully fun-
ded schemes. They cannot deliberately run on a de¬cit one year and make it up
by increased premiums the next year. In other words, only a State-run scheme can
be pay-as-you-go. A pay-as-you-go scheme is desirable if bene¬ts for ¬nancial
losses are to be periodical, at least where in¬‚ation rates are high or unpredict-
able and liable to considerable variation. A system in which security of periodical
payments depends on prudent investment of reserves may prove too risky in the
long term.
From a general-deterrence point of view a fully funded scheme is, in theory, more
e¬cient than a pay-as-you-go scheme. Under the latter, sums collected this year are
used in part to pay for injuries in¬‚icted by activities carried on in the past, whereas
under a fully funded scheme the premiums paid in any one year are su¬cient, and
only su¬cient, to meet obligations arising out of activities carried on in that year.

49 Leaving aside the complication introduced by the distinction between feature rating and experi-
ence rating: see
50 Palmer, Compensation for Incapacity, 338“9. On funding methods see further Ison, Accident
Compensation, 135“6.
Accident compensation in the twenty-¬rst century 479

In reality, however, even under a fully funded scheme new premiums are often used
to make up de¬cits (caused e.g. by in¬‚ation) incurred in previous years.

18.2.6 Goals of the system
Many of the issues we have discussed so far in this chapter can only be resolved if the
goals of a system for dealing with personal injury and death are made clear. Three
main goals can be distinguished: compensation, deterrence (or injury prevention)
and fairness (or corrective justice). An important ancillary goal, which is not strictly
a goal of a compensation system but is an end such a system can be used to further,
is achieving a particular pattern of social wealth distribution or redistribution.
Compensation is, of course, the principle underlying the assessment of tort
damages. Even so, there is a sense in which compensation is a subsidiary goal of tort
law, in that personal injury attracts compensation in tort only if a responsible
defendant can be found to pay it. Tort law focuses primarily on the obligation of
the defendant to pay rather than the entitlement of the claimant to be paid com-
pensation. The fundamental goal of tort law (as opposed to the tort system, of
which tort law is only a part) is corrective justice or fairness “ in other words, the
aim is to redress the balance of fairness or justice between the parties, which has
been upset by the tortious behaviour of the defendant. In a negligence regime that
conduct is, of course, carelessness; in a strict liability regime, the appropriate
conduct is causing damage by creating a risk of injury which then materializes. As
we have seen, there are strong reasons to doubt that the tort system is very e¬ective
as a deterrent or accident-prevention mechanism, and while economic analysts of
law (such as Calabresi) see deterrence as the main function and rationale of tort
law, the practical barriers to the ful¬lment of the deterrence function are so sub-
stantial that it is unsatisfactory to attempt to justify the tort system in terms of the
goal of deterrence. Finally, as we have noted, the tort system does have important
wealth-distribution e¬ects, in some areas at least. For example, the fact that third-
party motor insurance premiums are calculated without reference to the insured™s
income while tort damages are income-related, means that the wealthy get much
more out of the tort system than they put in relative to the poor.
So far as goals are concerned, there are some important di¬erences between
negligence-based and strict liability. In theory, at least, strict liability performs the
compensation function better, simply because more people will recover compen-
sation if fault does not have to be proved. As for deterrence, there has been much
discussion of the relative e¬cacy of negligence and strict liability, and of whether
strict liability will induce higher levels of safety than negligence liability. There is
reason to think that the only respect in which strict liability is superior is that, by
placing the costs of injuries not caused by fault on the defendant rather than on the
injured party, the former might be encouraged to initiate research and develop-
ment to reduce or eliminate the risks of such accidents. The corrective-justice prin-
ciple underlying strict liability is clearly di¬erent from that underlying the fault
principle “ strict liability is based on the idea that the person who reaps the bene¬t
480 Chapter 18

of engaging in a risky activity ought in fairness to bear the cost of any loss or
damage caused by the activity.
In terms of wealth distribution, strict liability coupled with liability insurance
could be just as regressive in e¬ect as negligence liability if, for example, liability for
motor accidents were strict. But in practice, proposals for strict liability tend to be
made in respect of entrepreneurial activities (such as manufacturing); in such cases,
the costs of liability will be passed on to consumers in increased prices. This may be
regressive if consumption by the poor is equal to or greater than that by the rich, but
the amounts involved per consumer will perhaps be so small that this element of
distribution in favour of the better-o¬ might be thought by some to be tolerable.
How well do no-fault schemes ful¬l the goals stated above? So far as compensa-
tion is concerned, the ˜success™ of any system depends entirely on who is entitled to
receive bene¬ts under it,51 on the level of bene¬ts and on how many members of the
eligible groups in fact receive compensation.52 We have already discussed the issue
of limited versus comprehensive reforms, and touched on the issue of how close to
the tort principles of full and hundred-per cent compensation no-fault bene¬ts
ought to be. Since no-fault schemes are all the result of legislative action, these
issues can be decided as a matter of principle and policy. In practice, justi¬cation of
no-fault schemes always involves being able to compensate more injured persons at
no extra cost, or compensating more people by removing conditions of entitlement
to compensation other than that of having su¬ered loss or being in need. A com-
mitment to wide entitlement rules is basic to a commitment to no-fault. Similarly,
the wealth-distributional e¬ects of a no-fault scheme can be designed in advance to
meet desired political goals; and they depend on the relationship between bene¬ts
and contributions.
No-fault schemes are often criticized because of their failure to further the goals
of deterrence and corrective justice. Because no-fault systems do not involve an indi-
vidual causer of injury paying an individual victim of injury, they clearly do not
embody the principles of justice and fairness (or further the associated goals of ret-
ribution and vindication) which are a feature of the tort law and the tort system.
Rather, no-fault systems embody a principle of social justice and community
responsibility for those in need.
What is the basis of the idea of social or community responsibility? The simplest
basis is to say that everyone is entitled to a basic standard of living and to have certain

51 For a feminist critique of the New Zealand Accident Compensation Scheme see L. Delany
˜Accident Rehabilitation and Compensation Bill: A Feminist Assessment™ (1992) 22 Victoria U. of
Wellington LR 79.
52 This has two aspects: the question of take-up (what proportion of eligible claimants actually seek
bene¬ts) and the problem of manufactured or exaggerated claims. Regarding the latter,
M.J. Trebilcock argues that di¬erential bene¬t rates for di¬erent classes of claimants (based on the
causes of their disabilities) should be used to reduce moral hazard under no-fault schemes:
˜Incentive Issues in the Design of No-Fault Compensation Systems™ (1989) 39 U. of Toronto LJ 19.
By contrast, the social security system deals with moral hazard mainly by requiring claimants for
disablement and invalidity bene¬ts to undergo medical examinations.
Accident compensation in the twenty-¬rst century 481

basic material needs met, and that inequalities in society are only acceptable once
everyone has been brought up to a minimum level of material well-being. This argu-
ment, however, will not justify a system which provides earnings-related bene¬ts or
(perhaps) compensation for non-pecuniary loss; nor a system in which people with
like needs are treated di¬erently according to the source of their needs (e.g. a system
in which accident victims receive earnings-related bene¬ts but the unemployed
receive basic ¬‚at-rate bene¬ts).
Another approach (which underlay the report on which the New Zealand
scheme was based)53 is to argue that because the activity of individuals in society
is the cause of many personal injuries, society as a whole ought to take responsibil-
ity for these injuries. The nature of modern social life, it is said, generates an increas-
ing amount of personal disability, and so society as a whole should bear the ¬nancial
burden of these disabilities. This approach su¬ers from serious conceptual
di¬culties. In the ¬rst place, it assumes that for the purposes of society™s responsi-
bility to provide compensation, there is a relevant di¬erence between disability
caused by human action and disability resulting from natural causes. As was argued
earlier (1.2), this distinction is not easy to justify, and many would question the idea
that society (as opposed to individuals) has any more or less responsibility in the
one case than in the other. Secondly, by utilizing the notion of causation, the
approach makes it di¬cult to justify compensating for disabilities the cause of
which is not known with any certainty; and it also introduces into the debate many
of the ambiguities and value-laden uncertainties of the notion of causation.
Thirdly, even if we accept the link between individual causation of disability and
social responsibility in the abstract, we might have doubts about its applicability to
cases such as disabilities caused by criminal conduct. Many would vigorously deny
that social conditions (as opposed to the free choice of the criminal) are the real
cause of criminal activity. On the other hand, community responsibility might
seem clearer in the case, for example, of victims of government-backed vaccination
programmes or of volunteers in drug-testing programmes, because their injuries
are the result of taking part in activities which are speci¬cally designed for the
bene¬t of all. Finally, the notion of social responsibility by itself goes very little way
towards determining exactly what society ought to do to help the disabled whose
incapacity is society™s responsibility. Should bene¬ts be basic ¬‚at-rate or earnings-
related? Should intangible losses be compensated for (do they generate ˜needs™)?
The choice of justi¬cation also has rami¬cations for the issue of funding. The
˜needs™ justi¬cation might be seen as justifying funding by progressive taxation,
whereas the ˜causal responsibility™ approach might seem more congenial to funding,
as far as possible, by levies on disability-causing activities proportional to the risks
created by them.

53 But note that the scheme as it now operates contains signi¬cant elements of ¬rst party insurance:
R.S. Miller, ˜An Analysis and Critique of the 1992 Changes to New Zealand™s Accident
Compensation Scheme™ (1992) 5 Canterbury LR 1.
482 Chapter 18

The choice between individual and social responsibility is, of course, of great
importance; but it is hardly a valid criticism of either the tort system or of no-fault
schemes that they do not embody the fundamental justice ideas of the other. On
the other hand, it is valid to ask how well each type of system ful¬ls the justice goals
it sets for itself; and there are, as we have seen, several compelling grounds for
believing that the tort system does not give proper e¬ect to the principle of indi-
vidual responsibility embodied in the fault principle. So far as no-fault systems are
concerned, the idea of social responsibility, as we have noted, is open to so many
interpretations that individual no-fault schemes can only be assessed according
to the values of the assessor, and according to how well the system achieves its
expressed aims.
As for deterrence, a no-fault system clearly does not perform the function which
tort law aims at when it sets up standards of conduct. However, this educational
function could (and would probably have to) be performed by an agency charged
with responsibility for promoting health and safety.54 In addition, it may be desir-
able to strengthen the role of the criminal law, of health and safety inspectorates and
regulators and of disciplinary procedures (e.g. within the medical profession)55 in
order to provide improved incentives for those whose activities are a potential
source of claims.56 There is some evidence that accident rates in New Zealand
increased after the introduction of the Accident Compensation Scheme.57 But there
is no reason in theory why a no-fault system should not achieve as much by way of
general deterrence as the tort system. Contributions to the scheme could be related
to the risk of injury created by the contributor on the basis of feature-or experience-

54 Ison, Accident Compensation, ch. 8.
55 M.A. McG. Vennell, ˜Medical Injury Compensation Under the New Zealand Accident Com-
pensation Scheme: An Assessment Compared With the Swedish Medical Compensation Scheme™
[1989] Professional Negligence 141.
56 Such moves might be desirable even in the absence of no-fault schemes, given doubts about the
deterrent e¬cacy of tort law. S.A. Rea argues against the total abolition of fault-based liability on
the ground that non-tort mechanisms of deterrence are better developed in some contexts than
in others: ˜Economic Analysis of Fault and No-Fault Liability Systems™ (1986“7) 12 Canadian
Business LJ 444, 471.
57 Klar, in Steel and Rodgers-Magnet, Issues in Tort Law, 37“8. C. Brown shows that the level of
injuries and deaths in road accidents has fallen in New Zealand since the introduction of
the Scheme as a result, probably, of new safety legislation and of enforcement measures by
the police. What is not clear is whether the fall would have been greater if tort had not been
abolished: ˜Deterrence in Tort and No-Fault: The New Zealand Experience™ (1985) 73
California LR 976. See also J. O™Connell and S. Levmore, ˜A Reply to Landes: A Faulty Study of
No-Fault™s E¬ect on Fault?™ (1983) 48 Missouri LR 649. Increases in deaths and injuries result-
ing from road accidents following the introduction of a no-fault scheme in Quebec has been
attributed to the fact that the scheme covers more injured people than the tort system did, and
the fact that premiums are ¬‚at-rate: J. O™Connell and C. Tenser, ˜North America™s Most
Ambitious No-Fault Law: Quebec™s Auto Insurance Act™ (1987) 24 San Diego LR 917, 928; see
also R.A. Devlin, ˜Some Welfare Implications of No-Fault Automobile Insurance™ (1990) 10
International R. of Law and Economics 193; J.D. Cumins, R.D. Phillips and M.A. Weiss, ˜The
Incentive E¬ects of No-Fault Automobile Insurance™ (2001) 44 J. of Law and Economics 427
(introduction of no-fault results in an increase in fatalities, at least if funding is not risk-
Accident compensation in the twenty-¬rst century 483

rating.58 We have seen that there are di¬culties both with the general theory of eco-
nomic incentives (17.8) and with classi¬cation and experience rating in particular
(17.7.2). But these di¬culties are no greater in a no-fault system than in the tort
system.59 Indeed, in a no-fault system administered by a central agency, useful stat-
istics could gradually be gathered on which a more sophisticated system of rating
could be based.
In New Zealand the accident scheme is funded from four sources: employers,
earners, motor vehicle owners and health professionals. Some additional funding
is provided by a petrol levy. All premiums can be experience-rated, but ˜it is unlikely
that the scheme proposed will achieve its intended aim of fairness and equity
between premium payers™.60 We have already seen that there are great problems with
experience rating, not least its expense. Also, many accident-causing activities are
subject to no levies at all, so that such activities receive no economic safety incen-
tives from the scheme.61
It may be apparent from what has been said already that, although a no-fault
scheme can be funded in such a way as to meet a variety of social goals, choices
between these goals may well be necessary, since it would not be possible to pursue
them all simultaneously. In particular, if a no-fault compensation scheme were seen
basically as a social security programme to ful¬l society™s responsibility to the dis-
abled, the most justi¬able funding mechanism would be a general progressive tax “
and this would be so whether the bene¬ts were basic ¬‚at-rate or earnings-related.
This method of funding would involve at least partial abandonment of the deter-
rence goal, which would require for its ful¬lment a set of levies, on disability-
causing activities, which would internalize the costs of disabilities to the activities
that caused them. Disabilities not caused by human activities could then still be
paid for by general taxation. It may be that a mix of taxation and levies based on
risk provides the best possible funding pattern.
Finally, it is worth noting that a major advantage called in aid to justify the
change from tort liability to no-fault compensation is that the administrative costs
of a no-fault system are usually much less than those of the tort system. For
example, the Pearson Commission found that under the tort system the adminis-
trative cost of delivering £1 of compensation was around 85 pence, while the cost
of delivering £1 of social security bene¬ts was only around 11 pence. The cost of
handling claims under the New Zealand Accident Scheme is about 7% of the

58 Ison, Accident Compensation, 124“34. There is some evidence that where a no-fault scheme replaces
an e¬ective fault-based one and the level of bene¬ts under the no-fault scheme is lower than under
the fault-based scheme, this may encourage care: R.I. McEwin, ˜No-Fault and Road Accidents:
Some Australian Evidence™ (1989) 9 International R. of Law and Economics 13.
59 But for a pessimistic assessment see C. Brown, ˜Deterrence and Accident Compensation Schemes™
(1978) 17 U. of Western Ontario LR 111.
60 Vennell and Manning,˜The Accident Rehabilitation and Compensation Insurance Act 1992™, 9; see
also ibid., 7.
61 Furthermore, the deterrent e¬ect of the levies, especially those on manufacturers, is further
diluted if the levies are spread via the price mechanism.
484 Chapter 18

bene¬ts paid.62 It does not follow from this that the tort system is too expensive,
because it may be argued that the tort system serves goals and values which by their
nature are expensive to secure “ for example, the highly individualized nature of
the damages assessment process in the tort system is inherently expensive. But since
such a relatively small number of injured people receive compensation under the
tort system, and given that the administrative cost is so substantial, it is necessary
to ask very seriously whether the tort system is worth what it costs. It is di¬cult to
answer this question other than negatively.

18.3 Proposals and schemes
18.3.1 Road accident schemes
The majority of no-fault schemes so far enacted have been limited to road acci-
dents,63 although there are quite a few criminal injuries schemes,64 and some
drug injuries schemes. The industrial injuries scheme in this country is, of course,
a no-fault social security scheme, but in most countries which have specialized
industrial injuries schemes, compensation is given on the basis of strict employer
liability funded by compulsory insurance. In US and most Canadian jurisdictions,
the insurance fund from which no-fault road accident compensation payments are
made is operated by the same private insurance companies as o¬er standard third-
party liability insurance. In some jurisdictions, such as Victoria and Saskatchewan,
the fund is operated by a government insurance agency, but this does not alter the
essential nature of the scheme. In systems where the no-fault scheme is ¬nanced
solely by premiums paid by vehicle owners, claims made by others injured on the
road will be third-party, not ¬rst-party, claims (i.e. they will be made against the
insurer of the vehicle by which the person was injured).
Tra¬c accident schemes fall into three broad categories.65 First, there are ˜add-
on™ schemes, which typically provide limited no-fault bene¬ts for pecuniary losses
arising from personal injury, but no no-fault bene¬ts for non-pecuniary losses or
property damage. Under such schemes the tort action remains intact, but there are
provisions requiring no-fault bene¬ts to be set o¬ against tort damages to prevent
double recovery.66
The second type of no-fault scheme can be called the ˜modi¬ed™ scheme. Under
modi¬ed schemes the no-fault bene¬ts are similar in type to those available under
add-on schemes, although sometimes greater in amount. However, the right to sue

62 Palmer, Compensation for Incapacity, 227.
63 J.G. Fleming, The American Tort Process (Oxford, 1988), 166“74.
64 Such schemes are not strictly no-fault schemes: they are run along administrative, not judicial,
lines; payment is made out of a fund, usually provided from general taxation; and the claimant
does not have to identify the wrongdoer. But the claimant must establish that the injuries were the
result of a violent crime, and so in this respect such schemes are fault-based.
65 But many schemes do not fall exactly into any one category.
66 An example of such a scheme is that in operation in Tasmania. For more details of this and other
Australian schemes see R. Balkin and J. Davis, Law of Torts, 3rd edn (Sydney, 2004), 422“7.
Accident compensation in the twenty-¬rst century 485

for tort damages for non-pecuniary loss is abolished in less serious cases. In some
jurisdictions, the right to sue in tort in respect of pecuniary losses is not a¬ected,
but set-o¬ provisions prevent double recovery; in other jurisdictions, this right is
abolished to the extent that the claimant is entitled to recover no-fault bene¬ts.
Quite a few US States have adopted modi¬ed no-fault schemes.67 In a couple of
States, the no-fault scheme gets very close to abolishing tort altogether “ no-fault
bene¬ts for pecuniary losses are high, and the right to sue in tort is abolished to the
extent of these bene¬ts; tort damages for non-pecuniary loss can be recovered only
in very serious cases.
The third category of scheme comprises what might be called ˜pure™ no-fault
schemes.68 Under such schemes the tort action is abolished entirely. The chief
example of a pure scheme is that in New Zealand,69 which has been in operation
since 1974 and covers accidents of all types, not just road accidents. In broad
terms, modi¬ed no-fault schemes are designed to deal with less serious cases on a
no-fault basis, and to restrict use of tort to more (or the most) serious cases. Under
a pure no-fault scheme, since tort is abolished more or less entirely, the bene¬ts
under the no-fault scheme have to be generous enough to provide adequate com-
pensation even in the most serious cases. Thus bene¬ts for loss of earnings tend,
subject to certain thresholds and ceilings, to be standard-of-living bene¬ts; in add-
ition, limited bene¬ts for non-pecuniary loss are usually available on a tari¬ basis
according to the type or degree of disability. The tort concept of full compensation
(restitution in integrum) forms the basis of the bene¬t scales in such schemes.
No-fault schemes generally cover personal injury only, but in a couple of US States
there have been signs of a movement to no-fault property damage compensation as
well. State-run pure no-fault schemes are unlikely ever to embrace property dam-
age. Pure no-fault schemes tend to place considerable emphasis on rehabilitation as
well as compensation, and facilities may be provided for this purpose.70
In Britain the road accident scheme proposed by the Pearson Commission did not
fall neatly into any of the above categories. The proposal involved an extension of the
industrial injuries scheme (itself extended to cover the self-employed) to road acci-
dents “ loss of earnings bene¬ts would have been less than those available in tort, and
compensation for disability would have replaced damages for non-pecuniary loss. As

67 Many of the US schemes were inspired by R.E. Keeton and J. O™Connell, Basic Protection for the
Accident Victim “ A Blueprint for Reforming Automobile Insurance (Boston, 1965). The scheme in
Victoria is best described as a modi¬ed scheme. For details see I. Malkin, ˜Victoria™s Transport
Accident Reforms “ In Perspective™ (1987) 16 Melbourne ULR 254.
68 The scheme in operation in the Northern Territory of Australia is close to a pure scheme. The
Quebec scheme is also pure: O™Connell and Tenser, ˜North America™s Most Ambitious No-Fault
69 Although even here, the right to sue in tort for exemplary damages in suitable cases has been held
to have survived the enactment of the scheme. Also, tort actions are only abolished in cases
covered by the no-fault scheme. The scheme never covered diseases (except occupational diseases)
which were not the result of an accident, and in 1992 its coverage was further reduced as part of
a wide-ranging review of the social welfare system designed to reduce public expenditure.
70 Ison, Accident Compensation, ch. 7; Palmer, Compensation for Incapacity, 391“9.
486 Chapter 18

in the case of industrial injuries, the tort action would not have been abolished (thus
allowing recovery in serious cases of the di¬erence between no-fault and tort
bene¬ts), but bene¬ts obtained under the no-fault system would have been set o¬ in
full against tort damages. The Commission also recommended that damages for
non-pecuniary loss should not be recoverable in tort where the claimant completely
recovered within 3 months. The aim of these proposals was to eliminate many minor
tort claims, to transfer the bulk of the remainder to the social security system and
to relegate the tort action to cases of serious and lasting disability, especially
those involving high earners. In essence, therefore, the proposals were for a modi¬ed
no-fault scheme. No-fault road accident proposals put forward by the Lord
Chancellor™s Department in 1991 were, in e¬ect, for an add-on scheme under which
claims worth no more than £2,500 would have fallen within the no-fault scheme.
Which of the three types of no-fault scheme is to be preferred? We have already
noted that dual schemes, which retain the tort action wholly or partly, appear to
su¬er from two major disadvantages: they require the retention of the apparatus of
third-party liability insurance in addition to the new ¬rst-party insurance mechan-
ism; and, secondly, they subject to the defects of the tort system those most
in need “ the seriously disabled.71 This second disadvantage appears even more
signi¬cant when it is recalled that the tort system tends to over-compensate in
minor cases and to under-compensate in serious cases (10.6).
At the end of the day the success of any reform depends on how well it eliminates
the faults of the old system. The main defects of the tort system, which no-fault
schemes aim to ameliorate or eliminate are: the high volume of litigation generated
by the need to decide complex issues of fault and assessment of damages; the high
administrative costs (legal fees and insurance company overheads) of the tort
system; the fact that the majority of road accident victims receive no compensation
from the tort system, and that of those who do, the less seriously injured tend to be
over-compensated while the more seriously injured are often under-compensated;
the delay in obtaining compensation; the fact that the dynamics of the settlement
process lead many claimants to accept considerably lesser sums than they would be
awarded by a court. US research suggests that add-on schemes do very little to elim-
inate these defects, while modi¬ed schemes fare considerably better.72 If partial abo-
lition of tort can achieve improvements in the above respects, one can be con¬dent
that its total abolition improves matters even more.
Another crucial issue is that of cost. Two questions arise: does the no-fault system
cost more or less than the old system would have cost for the same period; and is the

71 A third suggested disadvantage is that dual schemes which o¬er generous no-fault bene¬ts actu-
ally encourage tort litigation: J. O™Connell, ˜Reforming New Zealand™s Reform: Accident
Compensation Revisited™ [1988] New Zealand LJ 399, 400.
72 See n. 28; J. O™Connell, ˜Operation of No-Fault Auto Laws: A Survey of the Surveys™ (1977) 56
Nebraska LR 23 and The Lawsuit Lottery (New York, 1979), ch. 8; R.A. Henderson, ˜No-Fault
Insurance for Automobile Accidents: Status and E¬ect in the United States™ (1977) 56 Oregon LR
Accident compensation in the twenty-¬rst century 487

no-fault system more e¬cient in the sense that a greater amount of its total cost is
paid out in compensation (as opposed to administrative costs) than under tort? As
for the ¬rst point, reformers usually perceive it to be politically prudent to design a
road accident scheme which costs no more than the existing tort system, and reform
proposals are often accompanied by actuarial calculations and costings to show that
this aim has been achieved. The way it is achieved consistently with compensating
many more people is by reducing the levels of compensation for lost earnings and
for non-pecuniary loss, and by reducing administrative costs. US evidence on the
cost of dual systems is equivocal. But it seems quite clear that the administrative
costs of a pure no-fault scheme would be dramatically less than the administrative
costs of the tort system; so provided bene¬ts were not pitched too high, it would not
be di¬cult to compensate many more people at no extra cost. Of course, commit-
ment to no extra expenditure is quite easily satis¬ed in the road accident sphere
because so much is currently spent on compensating victims of road accidents. The
extension of no-fault schemes to areas where very few people currently receive tort
damages would probably require considerable new expenditure, if bene¬ts greater
than basic and generally available social security bene¬ts were to be paid.
Finally, it is worth noting again that limited no-fault schemes, such as road acci-
dent schemes, invariably create (or entrench, or extend) a preference for one group
of the disabled over others. The justi¬cation for limited road accident schemes
appears not to be that road accident victims deserve preferential treatment. The cat-
alysts for such limited reform are the fact that the problem of road accidents is an
old and easily recognized, not to say glaring, one; and the fact that it has been at the
centre of criticism of the tort system because it is a major area of e¬ective tort lia-
bility which has not previously been encroached upon by strict liability or social
security schemes (as the industrial injuries area has) which have, to some extent,
diverted attention from the defects of the tort system. The concentration on road
accidents is looking increasingly anachronistic in the light of our growing realiza-
tion of the role of human activities in producing all sorts of non-traumatic injuries.
Moreover, road accident victims are already relatively well catered for by the tort
system. If extra money is to be made available for extension of, or improvements in,
the social security system, what is the case for injecting this money into those
corners where victims already do relatively well? As one MP was moved to comment
in the debate on the Pearson Commission Report in 1978: ˜The arguments about
improvements and alterations to the tort system are irrelevant. They are arguments
about the distribution of the icing, when more than 90 per cent of the victims are
not getting any of the cake.™73

18.3.2 Other schemes
The variety amongst no-fault road accident schemes is partly a result of the fact that
the tort system is much used in this area. This has generated various solutions to the

73 Bruce Douglas-Mann, Hansard, HC Debs, vol. 958, col. 838 (17 November 1978).
488 Chapter 18

problem of the relationship between tort and no-fault schemes. A similar variety
exists in the way industrial injuries are dealt with in di¬erent jurisdictions “ indus-
trial injuries are, of course, the other main area of e¬ective tort liability. One might
have thought that in areas where successful tort actions are much less common,
there might be less variety in the approach to the preservation of tort liability; but
a survey of drug injury compensation schemes shows this not to be the case.74 The
West German scheme is based on strict liability-cum-liability insurance. The
Swedish scheme75 has three components: basic losses are met by social security, and
further losses are dealt with by a voluntary (i.e. non-statutory) ¬rst-party insurance
scheme (analogous to the Motor Insurers™ Bureau scheme in England), set up by the
pharmaceutical manufacturers and importers with major insurance companies; tort
liability continues to exist, but all bene¬ts received from social security or the insur-
ance scheme must be set o¬ against tort damages, and neither of these funds has a
right of recourse against the tortfeasor. In Japan the tort remedy continues to exist
and, indeed, no-fault bene¬ts are not payable if it appears that someone™s negligence
was responsible for the injury.
The Swedish idea of using private ¬rst-party insurance to cover top losses rather
than basic losses is a ¬‚exible one, because it could be combined either with a social
security system, o¬ering ¬‚at-rate income bene¬ts or earnings-related bene¬ts up to
a ceiling; or with a tort system made subject to a damages ceiling “ this would utilize
the acknowledged fact that the tort system compensates generously for minor
injuries, but inadequately for serious cases of large losses.76

18.4 The way ahead
18.4.1 A social welfare solution
In the third edition of this book it was argued that what was needed was a single
comprehensive system for assisting the disabled, based on the existing social secur-
ity system, but with bene¬ts as large as society can a¬ord. In particular, it was sug-
gested that the most practicable and desirable direction of movement was the
progressive abolition of tort actions77 for personal injury accompanied by a gradual

74 Fleming, ˜Drug Injury Compensation Plans™.
75 There is a similar scheme covering injuries caused by medical treatment (other than drugs):
M. Brahams, ˜The Swedish No-Fault Compensation System for Medical Injuries™ [1988] New LJ
14 and 31. There are two similar schemes in Finland: M. Brahams, ˜No-fault in Finland: Paying
Patients and Drug Victims™ [1988] New LJ 678; see also W. Wadlington and W.J. Wood III, ˜Two
No-fault Compensation Schemes For Birth Defective Infants in the United States™ [1991]
Professional Negligence 40. The steam was taken out of English proposals for a no-fault medical
injuries scheme (see [1989] New LJ 101, 109, 119 and 124; Royal College of Physicians,
Compensation for Adverse Consequences of Medical Intervention (London, 1990)) by the introduc-
tion of Crown indemnity in 1990. As we saw in 18.1, the Chief Medical O¬cer has recently pro-
posed a limited no-fault scheme for birth injuries.
76 C. Morris and J.C.N. Paul, ˜The Financial Impact of Automobile Accidents™ (1962) 100 U. of
Pennsylvania LR 913.
77 For a spirited defence of the tort system see A. Burrows, Understanding the Law of Obligations
(Oxford, 1998), ch. 6.
Accident compensation in the twenty-¬rst century 489

extension of the industrial injuries scheme, with any necessary modi¬cations, ¬rst
to all accidents and, ultimately, to disease and illness, whether caused by human
action or the result of natural causes.78
The main argument in favour of such a comprehensive scheme lies in the unfair-
ness produced by lack of integration of the various presently existing schemes for
assisting the disabled. Not only is the element of over-compensation, created by the
overlap of systems, a waste of resources, but it is indefensible to compensate some
people twice over while others go without any compensation at all. For example,
how can we justify paying compensation twice over to a person who loses an eye in
an industrial accident merely for the disability itself,79 while we refuse any com-
pensation for the disability itself to a person who is blinded by a disease resulting
from natural causes? How can we justify giving social security bene¬ts to people
who continue to receive full wages while they are o¬ sick80 when the level of long-
term sickness bene¬ts is still so low?
Then there is the di¬culty of justifying payments made under one system
but refused by another. How can we justify giving damages for loss of support to
a young, childless widow, for example, when the social security system provides
no assistance at all to a childless widow under 45 unless she is destitute or incap-
able of work. Surely society must decide whether it thinks a widow is entitled
to support irrespective of her capacity for work, and regulate its compensation
systems accordingly. Finally, there is the whole problem of justifying the various
preferences in favour of particular groups of disabled people embodied in the
present set-up.
On the other hand, it must be admitted that there are very considerable di¬-
culties facing the sort of comprehensive reform being suggested.81 In the ¬rst
place, it has been argued that the adoption by the EC of the Directive on Pro-
duct Liability, which requires Member States to provide citizens with a remedy in
tort, and which was implemented in Part I of the Consumer Protection Act 1987,
would prevent a UK government introducing any personal injuries compensation
scheme which involved the abolition of tort actions for victims of injuries falling
within the terms of the Directive; or even a scheme which provided victims of such
injuries with an entitlement to non-tort compensation in addition to the remedy
required by the Directive.82 If the argument is correct, then the more tort-based
remedies the EC requires Members States to provide for their citizens, the more

78 But this sequence of development might be controversial. Stapleton, Disease and the
Compensation Debate, argues that disease ought to be the ¬rst reform priority.
79 Social security bene¬ts are set o¬ against tort damages only in respect of a maximum period of
5 years after the accident.
80 It is up to the employer whether to set SSP o¬ against contractual sick pay.
81 See especially Brown, Disability Income, chs. 12 and 13.
82 J. Stapleton,˜Three Problems with the New Product Liability™ in P. Cane and J. Stapleton eds., Essays
for Patrick Atiyah (Oxford, 1991), 276“87. On the other hand, the decision in Matthews v. Ministry
of Defence [2003] 1 AC 1163 suggests that the European Convention on Human Rights would not
stand in the way of abolition of tort liability for personal injuries, although it would a¬ect the
design of the administrative process.
490 Chapter 18

di¬cult it becomes for any Member State to reform its law of personal injuries in
a comprehensive way.
Secondly, the sort of proposal made in the third edition of this book assumes
that the disabled should be treated as a separate group within the social security
system not only in respect of the special needs of the disabled as contrasted with
the able-bodied, but more generally. This assumption may not go unchallenged.
Even if it were universally accepted, it remains the fact that the disability income
system is extraordinarily complex, and the project of reforming it in a compre-
hensive way would be very di¬cult, time-consuming and expensive. The frag-
mented nature of the proposals made by the Pearson Commission perhaps
provides a warning against being too optimistic about the prospects for compre-
hensive reform. Nevertheless, the fact that a comprehensive accident scheme has
been in operation in New Zealand since 1974, and that a national scheme covering
disease and illness as well as accidents reached the stage of draft legislation in
Australia before being shelved after a change of government, shows that given
vision and energy, plus a determination that broad principles should not be
swamped by a mass of detail, a comprehensive scheme of assistance for the disabled
need not be unattainable.
Another major obstacle in the way of comprehensive reform is the inevitable
opposition from special interest groups, which, naturally, seek the preservation of
schemes, arrangements and preferences that bene¬t them. One of the important
arguments in favour of comprehensive reform is that justice requires that people
with similar needs should receive similar assistance. But justice is a very slippery
concept, and it is possible to make an argument, based on a more or less plausible
concept of justice, in favour of many of the preferences for particular groups
embodied in the present law. So comprehensive reform requires a ¬rm adherence
to a particular notion of social justice, and the political will to disregard the pleas
of those who receive special treatment under present arrangements. Recent history
does not give much cause for optimism on this score. But the importance of stand-
ing ¬rm is clear when one remembers that only a very small proportion of disabled
people bene¬ts from especially generous schemes.
A related di¬culty is that experience suggests that in a democratic system, large-
scale reform is, on the whole, harder to e¬ect than small-scale or incremental
change. This is no doubt one reason why, in the past, pressure groups have been
able to secure the enactment of speci¬c preferential schemes (such as those to com-
pensate vaccine-damaged children and people infected with HIV from contamin-
ated blood products). Since any reformer must accept the realities of the political
process, there may be an argument for aiming at comprehensive reform via limited
reform “ the development of more and more special schemes might generate pres-
sure for rationalization into a comprehensive scheme; or, alternatively, special
schemes might eventually cover virtually the whole ¬eld of disablement.
A major argument made against proposals for large-scale reform is that of cost.
In the case of some limited reforms, such as no-fault road accident schemes, this
Accident compensation in the twenty-¬rst century 491

objection can be met simply by designing a system which, by e¬ecting various
savings and trimming certain bene¬ts slightly, costs no more than the scheme being
replaced. Comprehensive reform will almost certainly require new money because
it would involve compensating many disabled persons who receive little or nothing
under present arrangements. One of the advantages of reform by extension of a
currently existing scheme is that by choosing a scheme (the IIS) with relatively
generous bene¬ts, the end result might be a general upgrading of provision for
the disabled. The danger in this course is that the objection of cost might lead to
a general downgrading of bene¬ts in the existing scheme before its coverage is
extended. There is, then, a basic dilemma facing the comprehensive reformer “
is it better to compensate more people at lower levels, or fewer people at more gen-
erous levels? In the end, a compromise is most likely which involves, for example,
compensating the more seriously disabled quite generously at the cost of relatively
low bene¬ts for those with only minor or short-term disabilities “ in this way a large
number of the disabled receive some assistance, but the more seriously disabled are
relatively better catered for.
Crucial to the issue of cost is that of whether the income-replacement element of
bene¬ts (as opposed to the element designed to meet the special needs of the dis-
abled arising out of their physical condition) is to be ¬‚at-rate and means-tested “
that is, designed to provide a level of reasonable subsistence; or earnings-related and
regardless of means “ that is, designed to compensate for income loss. We have seen
that income-relation is a basic principle of the New Zealand Accident
Compensation Scheme, and those who support special schemes for disabilities
identi¬ed by cause (e.g. industrial disabilities) usually argue that those whose dis-
abilities arise from a particular source deserve compensatory bene¬ts, even if social
security bene¬ts generally are ¬‚at-rate and means-tested. Clearly the cost of an
income-related scheme would be much greater than that of a ¬‚at-rate scheme, and
as a matter of principle it is reasonable to ask to what extent it is the obligation of
the State to maintain people in their accustomed way of life, as opposed to provid-
ing them with a reasonable ¬‚oor level of support. It is clear that very few would argue
that a State-run system should compensate relative to income, however high that
income is. But some reformers would argue that, up to a certain maximum, bene¬ts
ought to be income-related, at least if the income loss lasts for more than a relatively
short time (a qualifying period for income-related bene¬ts would save money, and
might encourage rehabilitation).
On the other hand, if the demand for income-relatedness were seen as a major
obstacle to comprehensive reform, it might be worthwhile giving more thought to
some sort of dual system under which ¬‚at-rate, means-tested bene¬ts at a reasonable
level would be available through the social security system, leaving it to individuals
to take out private insurance if they wanted bene¬ts above the State-provided level.
A related question concerns the future of tort law. One of the factors which has
led reformers to propose earnings-related bene¬ts is that the tort system provides
such bene¬ts (in theory at least) whatever the income of the injured person; and
492 Chapter 18

in order to defuse opposition to the abolition of tort it has seemed expedient to
provide bene¬ts under the new system broadly comparable to those available
under tort. This might suggest that at least some, if not most, of the opposition to
the introduction of a scheme under which all the disabled received ¬‚at-rate
income replacement, plus provision for special needs, could be defused by leaving
the tort system in existence so as to provide a source of earnings-related bene¬ts
for those who wanted them. Such a proposal would avoid some of the criticisms
of dual systems noted earlier. Since all the special needs of the disabled would be
met by social security, it could not be argued that those most in need (i.e. the
severely disabled) were being relegated to an inferior remedy “ their basic needs
would be met by the State. It is true that such a dual system would be administra-
tively expensive, but one might expect that the tort system would not be heavily
used if the State bene¬ts were reasonable in amount (ideally based on average
weekly earnings).
On the other hand, such a dual system su¬ers from what is really a fatal disad-
vantage. The tort system would provide earnings-related bene¬ts for only a propor-
tion of the disabled, as indeed at the moment it only covers a small proportion of
the disabled. It would be di¬cult to justify special treatment for some of the high-
earning disabled, when the removal of special treatment is a major justi¬cation for
comprehensive ¬‚at-rate bene¬ts. A much more satisfactory solution would be to
abolish tort and leave all high earners to insure themselves for income-related
bene¬ts if they wished.
Finally, it might be argued that the model for any comprehensive reform should
be the non-industrial incapacity bene¬ts scheme rather than the industrial injuries
scheme on the basis that provision for compensation for permanent disability,
regardless of income loss, is unjusti¬ed while so many are without adequate income.
Even if there is a genuine public demand for disablement bene¬ts over and above
adequate income replacement bene¬ts, there is a strong case for restricting these
bene¬ts to serious cases in which the disability threatens to destroy a person™s
normal mode of life. The emphasis in a comprehensive disability-bene¬ts scheme
should be ¬rmly on income replacement and provision for the special needs of the
disabled. On the other hand, the fact that the IIS is in some respects more generous
than the non-industrial incapacity scheme makes it a desirable starting point with
a view to encouraging the setting of bene¬ts for all the disabled at higher rather
than lower levels.83 Whatever scheme provides the basis for development, better pro-
vision should be made than under present arrangements for those who su¬er partial
loss of earnings, especially in cases of long-term disability. Working tax credit is not
an adequate response to this problem.
Given that the present political and economic climate is uncongenial to com-
prehensive reform, should lawyers support and press for whatever limited reform
(such as a road accident scheme or a drug injuries scheme) seems politically feas-

83 Leaving aside questions of relativities with other groups of social security bene¬ciaries.
Accident compensation in the twenty-¬rst century 493

ible? The answer must be ˜yes™. The waste and ine¬ciencies of the tort system are
continuing realities, and there is only so much that tinkering with the tort sys-
tem can achieve. Even if all we can realistically hope for is that the funds currently
tied up in the tort system as it now operates will be better used, this is enough to
justify a limited reform, even at the cost of creating or perpetuating anomalies
between road accident victims and other social welfare recipients. And in the
process the public mind might be su¬ciently weaned o¬ the idea of tort rights and
on to the notion of no-fault welfare rights, to lead eventually to more compre-
hensive reform.

18.4.2 A private insurance solution
The approach we have been discussing might be thought, at the turn of the
twenty-¬rst century, to be anachronistic and unrealistic. Surely there is simply no
prospect of reforms involving increases in public expenditure and expansion of
the social security system. If this is true, what should be done to meet the unde-
niably strong case for radical reform of the way we as a society deal with com-
pensation for injury and disability? Patrick Atiyah has argued that the way ahead
lies in ˜the spread of more ¬rst party insurance™.84 As a ¬rst move, he would abolish
the tort-cum-liability-insurance system in relation to road accidents and replace
it with compulsory ˜¬rst-party™ insurance paid for by car owners. The insurance
would cover not only the car owner but, for instance, passengers in the car and
pedestrians injured by it. Coverage would, of course, be on a no-fault basis. The
element of compulsion would only extend to coverage for medical expenses and
a basic level of income replacement, plus (perhaps) some compensation for non-
pecuniary loss in cases of very serious injuries.
In relation to all other injuries and diseases theoretically covered by the tort
system, Atiyah favours the abolition of tort liability, and leaving people to buy such
insurance as they want to provide protection against risks of personal injury and
illness over and above that already provided by the social security and social welfare
systems. Given the limited coverage of the tort system (largely con¬ned in practice
to injuries su¬ered on the roads, at work, in hospital and in public places), the only
contexts in which this proposal would represent a radical reform are those of occu-
pier™s liability claims, medical mishaps and work-related injuries. In the longer term,
however, the logic of Atiyah™s position seems to contemplate a possible, gradual
replacement of the social security and social welfare system with private, ¬rst party
insurance arrangements.
Those interested in understanding Atiyah™s ideas better are encouraged to read
The Damages Lottery. Here I will make just a few comments so as to indicate the
di¬erences of opinion between us. First, Atiyah™s reason for dealing with road acci-
dents in a special way seems to be the pragmatic one that the amounts currently
spent on compulsory third-party liability insurance could easily be switched to

84 P.S. Atiyah, The Damages Lottery (Oxford, 1997), ch. 8.
494 Chapter 18

¬rst-party loss insurance. Even in the case of the other major areas of the practical
operation of the tort system “ accidents in public places, work injuries and medical
mishaps “ the mechanism of change would not be so obvious or straightforward
because at present, people generally do not take out insurance to cover themselves
against injuries su¬ered in these contexts.85 However, there is no good reason of
principle why injuries caused in road accidents should receive di¬erent treatment
from injuries caused in any other way.
A second reservation about Atiyah™s approach concerns its voluntary nature. It is
only in the context of road accidents that Atiyah proposes that insurance should be
compulsory. But the reason he gives for compulsion “ that otherwise ˜too many
people would probably end up without any cover™ “ applies as much to other con-
texts as well. Under a voluntary system, the people least likely to be adequately
insured are the poor, the ill-educated and the vulnerable. The protection of such
people provides one of the strongest arguments for State provision of social services
and social security bene¬ts according to need. Compulsory redistribution of income
and wealth from those who are strong, rich and well-educated to those who are less
well-o¬ is one of the marks of a humane society. The freedom to be inadequately
insured against personal injury and disability is no freedom at all. I certainly support
a two-tier system in which cover for losses and expenses above a certain minimum
would be voluntary. But up to that minimum level, people should not be left to the
vagaries of the ˜free market™.
In my view, there is a strong case for abolishing tort law and the tort system
as a mechanism for compensating victims of personal injuries, illness and disabil-
ity. However, I also believe that the State has an obligation to guarantee an agreed
minimum level of support for those in need as a result of su¬ering injury, illness
and disability. This will inevitably involve a certain amount of wealth redistri-
bution, and probably the simplest way of achieving this is through the tax system.
Whether the provision of minimum support is administered by government agen-
cies or private organizations should be decided in terms of who can do the job most
Another problem with Atiyah™s proposals is that they depend on a considerable
expansion in the availability of a variety of ¬rst-party disability insurance products.
It is by no means clear that it is realistic to expect such a development. One study in
the late 1990s concluded that the private insurance industry is probably also unlikely
to be able to provide a¬ordable and comprehensive disability cover for sickness and
illness, especially for those on low incomes and in high-risk groups.86 Even in the
USA, where there is much less social provision for the disabled than in Britain, dis-

85 In the case of work injuries, employers are required to insure against tort liability to
their employees. There would be technical problems in replacing this with loss insurance pur-
chased by employers for the bene¬t of their employees (9.7); and it is not clear that employers
would have any incentive to compensate employees for the abolition of third-party insurance
in the form of higher wages which would enable employees to purchase their own loss insur-
86 T. Burchardt and J. Hills, Private Welfare Insurance and Social Security (York, 1997).
Accident compensation in the twenty-¬rst century 495

ability insurance is relatively uncommon.87 A recent Home O¬ce consultation
paper concluded that it would not be practical to require members of the public to
insure themselves against the risk of being a victim of crime, and that take-up of
voluntary insurance would probably be low.88 It must be admitted, however, that a
related problem may also a¬„ict any proposal to replace tort liability with social
security. For instance, in 2004 the IIAC concluded that work-related stress should
not be a prescribed illness for the purposes of the IIS, partly because of the di¬-
culty of diagnosing the condition accurately without the detailed examination of
individual cases characteristic (and responsible for much of the expense) of the tort
system.89 This suggests that there may be practical limits to the feasible coverage of
a high-volume, low-cost social security system of disability compensation. In short,
there may be certain misfortunes for which the tort system is the most feasible
compensation mechanism.
If this is a valid conclusion, the goal of total abolition of tort liability for personal
injuries and death, however desirable in principle, may be unrealistic in practice.
Perhaps comprehensive reform in either a welfarist or a market-oriented direction,
is a pipe-dream given the complexity of the human and social problems of injury,
illness and disability.

18.5 Damage to property
If tort law were completely abolished as a mechanism for dealing with personal
injuries, a question would arise about the fate of the law relating to property damage.
Except in the very special case of ships, actions for property damage are now in prac-
tice almost invariably con¬ned to cases of damage to vehicles (and such like) in road
accidents. Outside this sphere, few tort actions are ever brought, and those that are
brought rarely serve a useful social function. The practice of insuring property is so
much more widespread than the practice of insuring one™s own earning power that
no hardship would probably be caused by total abolition of the tort action for
damage to property, even if nothing else were put in its place.90 The deliberate
in¬‚iction of damage would, of course, remain a criminal o¬ence, as would careless
and dangerous driving. There is no doubt that this would save a great deal of money
for motorists in the long run, since it would be much cheaper for them to insure their
own cars against damage than to be compelled to go on carrying personal and lia-
bility insurance policies, even if they were restricted to property damage.
However, it is possible that people would ¬nd this inequitable in certain cir-
cumstances. For one thing, the fact that comprehensive insurance is not usually full

87 K.S. Abraham and L. Liebman, ˜Private Insurance, Social Insurance and Tort Reform: Toward a
New Vision of Compensation for Illness and Injury™ (1993) 93 Columbia LR 75.
88 Compensation and Support for Victims of Crime (2004), paras. 42“5.
89 IIAC Position Paper 13.
90 Although this conclusion must be subject to arguments about the loss-prevention e¬ect of tort
liability especially in cases of bailment (e.g. carriage and warehousing).
496 Chapter 18

insurance but involves an excess of £100 or more (not to mention loss of a no-
claims bonus) means that a motorist whose car was damaged entirely by fault of
another might well be dissatis¬ed if the law gave no redress against the other in
respect of uninsured losses and increased premiums.91 One possible answer to
this “ though a limited one “ would be to make it a regular practice for criminal
courts to make appropriate awards of compensation on the conviction of a
motorist for a driving o¬ence which caused damage to another vehicle. Alter-
natively, it might be possible to abolish tort liability for property damage except for
(say) the ¬rst £300 of damage, and then to prohibit people from insuring against
this liability. This would leave the property owner with insurance in the case of
really serious damage, while still being able to claim the loss of the excess or no-
claims bonus from another motorist at fault, and the fault principle would be given
a reality it does not now possess by ensuring that there was no liability insurance,
and that therefore the person at fault actually paid for the damage.92 On the other
hand, the inordinate cost of pursuing small tort claims might by itself be enough
to rule this out as an acceptable approach.

18.6 The role of the insurance industry and the legal profession
If actions for damages for personal injuries were eliminated, a large proportion of
the third-party liability insurance cover provided by the insurance industry would
no longer be required. Although no industry is likely to welcome the disappearance
of a substantial amount of business “ especially captive business such as third-party
liability insurance “ there are reasons to think that insurers do not ¬nd this a par-
ticularly pro¬table line of business. In any event, the insurance industry has no real
reason to fear the abolition of tort liability for personal injuries, especially if it were
replaced by a private loss insurance system. Even if the social welfare route were
taken, it is reasonable to expect increased demand for personal accident insurance
and income protection insurance on the part of high salary earners. In this way,
private insurance against loss through sickness or accident could supplement the
social security system for the more a¬„uent in precisely the same way as it does in
relation to retirement pensions.
And if “ though this seems less likely to win public acceptance “ legal liability for
negligent damage to property was also abolished (at least in some spheres), there
can be little doubt that there would in consequence be a great expansion of prop-
erty loss and damage insurance. It is true that the protection a¬orded the property
owner by legal liability of others is limited, and not very valuable in comparison

91 There is a considerable and growing market for ˜uninsured loss recovery™ products and services,
as revealed by searching ˜uninsured loss recovery™ on an internet search engine.
92 Professor Linden found it ˜paradoxical™ to contemplate the total abolition of actions for personal
injury, but drew back from abolition of actions for property damage: ˜Book Review™ (1971) 49
Canadian Bar Review 146, 151. The explanation is that an adequate and universal replacement for
the former is contemplated, but only a voluntary replacement for the latter.
Accident compensation in the twenty-¬rst century 497

with the much more extensive protection a¬orded by loss insurance; and therefore
the elimination of legal liability would not be a particularly good reason for decid-
ing to invest in property insurance if the property owner had done without it
before. But it might be expected that the psychological e¬ect of a change in the law
of this nature would be immense, and insurance companies would be well placed
to take advantage of this fact. Indeed, they would have to do so if the change were
to have any real prospect of success, because the main reason for proposing this
change so far as property damage is concerned is the belief that loss insurance is a
cheaper, simpler and more e¬ective form of protection for the property owner.
Clearly, the abolition of the tort action for personal injuries would have serious
implications for the legal profession.93 It is important that proposals for reform
should grasp this nettle, and not dismiss the problem with an airy reference to
˜vested interests™. The concerns of lawyers cannot be allowed to determine the shape
of the law relating to compensation for personal injuries; law is a social service, and
in the long run the interests of the consumers and not the administrators must
prevail. Moreover, abolition of tort actions would clearly be a slow process with a
long transitional period, if only because of the backlog of old cases waiting to be
disposed of when the legislation took e¬ect.
One obvious way in which the e¬ects on the legal profession of eliminating all
personal injury litigation could be cushioned would be to make legal aid available
for social security tribunals. These tribunals already deal with far more cases than
the tort system, and although the average case probably involves less money than
the average tort case, many social security cases involve entitlement to long-term
bene¬ts the value of which over a period may be many thousands of pounds. The
law relating to these bene¬ts is also extremely complex and yet it is administered in
the ¬rst instance by non-lawyers, and even social security appeal tribunals rarely
have the assistance of legal representatives for the claimant. There is a great deal to
be said even now for extending legal aid to some cases before these tribunals;
plainly, the case would be stronger if the social welfare route for reform of com-
pensation law were taken. The danger in this course of development is that social
security law would become as dogged by delay, technicality, formality and excessive
rigidity as the tort system; and this would open tribunals to the same criticisms as
are currently levelled at the courts. There is an argument for preserving tribunals
as ˜lawyer-free zones™.94
At all events, this ˜obvious™ solution for the legal profession is highly unlikely to
materialise. Governments of all political persuasions are keen to cut the amount

93 It has been said that one reason why ¬xed costs for road-accident claims were agreed relatively
easily in 2003 is that lawyers feared the introduction of cheaper, non-tort alternatives of com-
pensating for personal injuries su¬ered on the road: J. Peysner, ˜Finding Predictable Costs™ (2003)
22 CJQ 349, 365.
94 Empirical evidence shows that claimants who are represented enjoy greater success before social
security (and other) tribunals than claimants who are not. However, the research also shows that
non-legal representatives can do just as well or even better for the ˜clients™ as lawyers.
498 Chapter 18

spent on legal aid. Legal aid is no longer available for most personal injury claims;
and it is unlikely that conditional fees arrangements would have any place in a
tribunal-based social security system of personal injury compensation. If the
private insurance reform route were taken, there would undoubtedly be a certain
amount of litigation arising from disputes about policy coverage, but nothing like
the current volume of personal injury litigation. So far as the legal profession is con-
cerned, we may have to face up to the fact that without the tort system, society
would need fewer lawyers!

accident insurance 292, 293 attendance allowance 348
Accident Line 262, 263 Australia
accidents corporate defendants 231
de¬nition 3 insurance claims crisis 195“6, 197, 242
see also individual topics proposed national accident insurance
actions see claims scheme 16, 470, 473
actuarial tables 157“8
administration balance of probabilities 114, 117
costs 27“8, 194, 324, 451, 483 bankruptcy, defendants 225, 230“1, 246“7
Criminal Injuries Compensation Scheme banks 82
324“6 barristers, duty of care 69
income support 360 before-the-event (BTE) insurance 223, 263, 264
industrial injuries scheme 351“5 behaviour see conduct
social security system 260“1 benzodiazepine cases 219
after-the-event (ATE) insurance 223, 224, 264, bereavement
265, 463 bene¬ts 350“1
aggravated damages 420 damages for 89“90, 162, 169, 413
agreement not to sue 61“2 Beveridge Report 331“3
alcohol, duty of care and 80 blame culture 192“8, 269
alternative dispute resolution (ADR) 273“4 Brandeis brief 42
amenities, loss of 161 British Coal 221, 286
animals 72 British Nuclear Fuels 278
damage caused by 101 burden of proof 271
road accidents and 216 shifting 94“5
vicarious liability for 93, 248 ˜but-for™ see factual causation
annuities, structured settlements and 141
appeals Canada, duty of care in 79
Criminal Injuries Compensation Scheme cancer
324, 326 asbestos mesothelioma 20, 113, 193, 212,
social security tribunals 352, 353“4 231, 241
arbitration 274 delay in diagnosis 114
asbestos mesothelioma 20, 113, 193, 212, 231, statistics 20
241 capital
assault, consent to 62 adequacy 13
Association of Personal Injury Lawyers 194, 269 human 163
attachment of earnings order 226 captive insurers 228“9

500 Index

care see duty of care; standard of care funding see funding issues
carer™s allowance 349 group claims 212, 221, 267
causation 3, 6“11, 110, 129 negotiation 274“8, 286
contributory negligence and 54“5 industrial injuries and illnesses 216“18
egalitarianism and problem of drawing line medical injuries 219“21
10“11 negotiation 260, 261, 268“78
factual causation 111“18 breakdown of 278“81
causing and increasing risk of harm claims assessors (CAs) 262, 272
112“15 group claims 274“8, 286
limits on liability of factual causes 118“29 individual claims 269“74
multiple causation 116“18 time taken 281“4
omissions 115“16 public liability 218“19
proving 111“12, 188 reasons for (not) making claims 206“14
general deterrence theory and 450 alternative remedies 207“9
legal causation 118“25 claims consciousness 209“14, 326“7
mixed systems in mixed society 11“18 research ¬ndings 206“7
protecting reasonable expectations 9“10 road accidents 214“16
society™s responsibility for human causes 8“9 settlement see out of court settlements
strict liability and 93 claims assessors (CAs) 224“5, 262, 272
ceiling on bene¬ts 296 claims management companies (CMCs) 193“4,
charities, over-compensation and 389“90 224, 262
children and young people class actions 276
abuse 82 cohabitation, claims for fatal injuries and 134“5
congenital defects 72, 246 collection of evidence 270, 275
compensation for 16 collective liability 179“80
contributory negligence 57 common employment doctrine 36, 245, 328
statistics 21 common law, impact of liability insurance
Criminal Injuries Compensation Scheme 248“55
and 313, 316 communitarianism 12
duty of protection 79 collective liability 179“80
duty to control 81 social responsibility 8“9, 478“84, 480“2
life insurance for 295 compensation for accidents 3“6, 408“11, 461“6
responsibility for actions 92 de¬nition of compensation 4, 411“14
choice see also individual topics
of compensation system 378“80 compensation neurosis 131
consumers 454 Compensation Recovery Unit (CRU) 204“5
Citizens Advice Bureau 262 competition 453
Citizens™ Charter 194 perfect 439, 440, 455
civil partnerships 350 complications 130“1
claimants 201 compulsory insurance 12, 14, 36, 96, 234, 246
conduct see conduct compulsory purchase 185“6


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