It is time the Department of Justice assumed a greater responsibility in the administration of the courts. Leaving responsibility for change in the hands of the courts and a rules committee comprising judges and lawyers is a waste of time.
I have a document here from the "Business Insurance of the United States" of 2 June, 1986. This is a very reputable company. This article is very damaging and can be very damaging to Ireland. They show the map of Ireland, and across the map is a bandage showing the position in Ireland on employer' liability, industrial accidents and insurance budgets in the Emerald Isle.
Many US mutinationals, wooed by generous grants and capital allowances, have recently being enjoying "tax holidays" in Ireland. The initial start up attraction for foreign companies coming to Ireland included such financial incentives as
"tax relief on manufacturing profits through 31 December, 2000.
repatriation of tax-free profits without restriction.
a 100 per cent tax depreciation.
But US multinationals today find that staggering employers liability insurance premiums in Ireland are eroding the profits generated by favoured tax treatment. With the average premium estimated at 1.5 per cent of a company's payroll, there is a little doubt that the cost of employers' liability insurance has become a burden for manufacturing companies in Ireland.
Why does employers' liability insurance cost so much in the Emerald Isle?
Blame is usually placed on court awards for on the job injuries, now frequently called "rewards" rather than compensation. Although certainly a major factor high compensation awards cannot be cited as the only reason for the present predicament.
The Irish Government has encouraged foreign investment to create new jobs in Ireland and to develop its unskilled industrial infrastructure. As an offset financial incentives granted to foreign investors included 100 per cent training grants. But US multinationals, as well as other foreign investors, could not be expected to transplant urban habits in rural Ireland without some friction.
The friction, in this instance, came from employees. It is general knowledge that common law liability arises from the obligation that each person has to exercise care in his actions so that he does not cause bodily injury or damage to others. In common law, employees are entitled to damages only if an accident was caused by an employer's personal negligence. A worker has no claim against an employer merely because he met with an accident in his employment.
But as trade unions increased in strength, the notion of personal liability diminished. The employee credo became "them and us" or "if I get hurt somebody has to pay." One successful claim in a large company often spawned a number of similar claims.
The bureaucratic structure of the unions has helped to centralise the legal process in Ireland. One solicitor often facilitates a large amount of minor claims by having them in one job lot. This tends to encourage small claims and it is often alleged that workers deliberately inflict minor injuries on themselves to jump on this bandwagon. Employers risk a strike by workers if they dismiss an employee that is suspected of injuring himself deliberately.
The fault of the system, however, does not lie solely with the worker.
Another major reason for high employers liability insurance premiums is the fact that employers in Ireland are not as attuned as US employers to health and safety loss control procedures.
Most companies are in business to make profits not to be healthy and safe. Records show that the vast majority of work accidents in Ireland result from a failure to guard machines, slips, trips, falls and internal transport incidents. These accidents occur in Ireland with greater frequency, and although preventive measures are well known they are not always instituted.
While many US multinational subsidiaries in Ireland follow health and safety guidelines strictly, a large number of managers and employers in Ireland fail to discharge their legal duties. This failure which leaves a law of change as the only barrier between employees and an accident, adds to high frequency claims experience and helps to drive up insurance premiums.
Only 20% of Irish employees are covered by existing statutory laws that prescribe legal standards for employers. But all employers in Ireland — including those not covered by general statutory legislation — are subject to common law.
Common law underpins the rights of workers to a healthy and safe workplace. Unfortunately, common law principles are often used by employees to support a claim "after the fact" rather than by employers as a code of good practice in order to avoid accidents.
In common law, all employers in Ireland must provide their employees with:
A safe system of work.
Safe plant and equipment.
Competent fellow employees.
The broadest of employers' common law duties is a safe working place. This duty encompasses a proper instruction, effective supervision and safe work methods. Employers must ensure that the place of work is safe and that employees are afforded a safe means of access and egress.
The common law duty of safe plants and equipment obliges an employer to provide and maintain proper machinery, plant appliances and works needed to do the job.
The main body of legislation in Ireland, the Safety in Industry Acts of 1935 and 1980, imposes liability on the employer for securing the health, safety and welfare of employees. The laws also allow for criminal liability of managers.
An employer's duty under the Acts include training employees, guarding machinery, lighting, ventilation and protection against falls, chemicals exposures and noise. The laws also require an employer to establish a safety committee.
In addition, the 1980 Act obligates an employer to draw up a safety statement, detailing the provisions made by the company to safeguard the safety and health of the workforce, the extent of cooperation required from employees, the availability of safety training facilities and the measures taken to guard against specific hazards that are present in the workplace. When a company maintains a safety officer the statement must also detail his duties.
Complying with this aspect of the law makes employers, insurers and corporate legal counsel nervous that the statements may serve as a written blueprint for employees who sue for negligence.
Common law also requires an employer to select properly skilled people to manage and superintend the business. If employees are not judged competent the employer can be held vicariously liable for the acts or omissions of any employee where they result in injury of another worker. But regardless of how well trained or safety conscious a worker may be, accidents will happen.
Statistics show that the human failure rate for routine production operations is about one in 1,000 and rises to one in 100 for workers in stressful conditions. As these figures indicate, employers would be wise to emphasise the "safety place" approach to claims control rather than rely on a "safe person" approach.
While these measures might be construed as loss-control procedures, they are often the cause of high-liability claims experience.
When courts are left to define negligence, it is not sufficient for employers to try to fit machines with guards, instruct the workers in their use and have supervisors watching to prevent violations. Instead the legal doctrine of the unsafe system of work has resulted in negligence "rewards" for accidents that are truly incidental to the nature of an employee's work.
In most European Economic Community countries, these occurrences would be compensated by the State as social welfare accidents, rather than through an employer's liability insurer.
However unlike other EEC member countries, compensation for High Court claims in Ireland is still assessed by a jury. Lesser cases are adjudicated in Circuit Court without jury involvement and awards are limited.
Understandably, most claimants prefer to have cases tried in the High Courts, since the unpredictability of a jury usually means greater compensation.
Insurers, therefore, often settle small cases out of court because they fear big jury awards, although cases that could potentially result in large awards are usually litigated.
In the long-term view, however, insurers will probably be forced to litigate all cases in the hope of dissuading smaller claimants from bringing suit. While this may appear to be a minor solution, huge defence costs — usually provided outside of the policy limits — will undoubtedly keep premiums high. Policy holders can expect the problem to be compounded by the decreased number of insurers willing to write employers' liability insurance in Ireland. Increased insurance premiums hurt business because they add to the cost of goods produced in Ireland, making those goods uncompetitive with those other EEC member countries.
But the insurance industry cannot be expected to singlehandedly change an inefficient system. Neither can employers.
As is true in the United States, the court system needs to be changed. A proposal to abolish the jury system is being contemplated by the Irish Government but this is not a presentday solution.
In an ideal world no employees would suffer on-the-job-injuries, insurers would pay no claims and employers would not have to pay liability insurance premiums. In the real world, however, all an employer can control is frequency and severity of accidents.
On-the-job safety is the responsibility of both management and workers, although management should play a major role. Do remedies cost money? Yes, they do. Will the remedies save money? Yes, they certainly can. Why not look into what your subsidiary can do to help the employers liability insurance crisis in Ireland?
Remember the only thing worse than a staggering employers' liability premium is no coverage at all.
That document showing the map of Ireland and the bandage across it is being read throughout the United States by business people, especially people interested in export or going overseas to establish businesses. It is a sad reflection on Ireland and it might be one of the causes that will slow down people coming to this country and it should be taken very seriously. I will leave a copy of it with the Minister later.
I will give a few examples of our employers liability in Ireland. Small contractors pay 20 per cent of the total wages bill for their employers liability insurance. Shops paid 5 per cent. This 5 per cent has increased by 30 per cent per annum compounded over the last three years. Cover is often not available and many risks are no longer covered. The minimum premiums are becoming more common, especially with the very big insurance people, Lloyds. Minimum premiums are not refundable so that if a person takes out an insurance policy for X number of pounds to cover something for 12 months and if it fails for some reason the balance of the cover is not refunded. It is not refundable and this is becoming a common practice.
Another feature of the minimum premium is that the banks do not finance it. The banks are not charitable institutions; they are not in competition with the St. Vincent de Paul or the credit unions; they have to account for their money to their shareholders and they are not going to finance something where there is no refund or no equity in the event of it failing. If they finance a car or a machine and the company fails, at least they have collateral; they can recover the machine and they will get something out of it but with the minimum insurance premiums they will get nothing.
A high proportion of business using the premium plans find these are becoming more expensive as a result of high interest rates. There is a new thing now with some insurance companies and one in particular —"There is no problem about your insurance premium; you can pay it over 12 months in monthly payments." That is grand when you get it, but when you find at the end of the year that your insurance has gone up by another 30 per cent — the usual rate is about 2½ per cent per month — then your insurance becomes a dear insurance. People who have not got the capital at the beginning to pay out for insurance find it very handy to use this scheme, but they find it very expensive.
Fire and theft is now a problem because malicious damage cover is to be removed. When the malicious injury and malicious damage cover is removed the estimated cost is 20 per cent upon existing premiums and that is only for a start because the insurance companies will find out that they pay a lot of malicious injury claims and pay a lot of frivolous claims. In the old days it was a pain in the back, but there is a modern one now which is whiplash: if the car stops suddenly one gets whiplash and one can get about £10,000 compensation because the company do not want the expense of going to court.
The city centre is in the news a lot these days as it was a couple of years ago. Cover is not available without value connections and of course value connections mean that somebody who has a premises in the city must supply supporting business. That can be done through a multinational or a company that is nationwide and can transfer costs from one place to another and the company can average out give cover, but somebody who has a business in the city centre only cannot get cover. The city centre does not have to be Sheriff Street and the back of O'Connell Street: it has extended to Molesworth Street and on to Duke Street.
I know of a case of a shop that had been insured for the last eight years with a certain company and certain requirements were made each year by way of safety, screens and walls and so on, and these were always complied with. There was never a break-in in these premises and a claim was never made but the insurance company decided they would not cover it any more. After a long battle with the solicitors they decided to cover the premises but the premium was five times what it had been and they gave no reason for it. Extra conditions applied also. Fortunately, the person was going to become his own insurer because he could not pay the premium but another insurance friend told him that he could get cover from another company which he did and he got it at the old rate and no restrictions were put on it. So, the insurance companies are not consistent. While I do not expect them to take on bad risks where they have no chance, I think they should take reasonable risks because that is what they are there for and that is what the business is all about.
Capital liability is really a rip-off especially when exporting to the United States. A typical example of that is pharmaceuticals. The insurance premiums on exports of pharmaceuticals to the States is nearly equal to the amount of money they get for the pharmaceuticals. People had to stop exporting or, where they have good connections and fairly safe travel arrangements, they export without any insurance cover and become their own insurers.
Another problem which exists in Dublin — and people are inclined to deny this — is the protection racket. When I raised the question of the protection racket in Dublin at the small businesses committee meeting one insurance company representative said in a chat with me afterwards that he could not admit that and he would not admit it, but he would admit it to me; if I wanted to quote him afterwards he would deny that he ever said it to me. I said: "I will not quote you but I will quote the case". He said that they insure a number of businesses, particularly pubs where so much has to be paid out every week to gangs to give these premises protection against raids, in other words, to give them protection against these same gangs raiding them, that people have gone out of business and that is a very dangerous situation. Sometimes protection money has to be paid to a number of gangs. The Garda have enough of problems without this but it is a problem that will have to be looked into and it is very serious.
Another insurance problem — I wouldn't call it an insurance racket — relates to travel insurance where you book your holidays and some companies, even though you have your own insurance, or even if you do not want insurance and are prepared to be your own insurer, insist on you taking out this insurance. You pay a high premium for it but then, to add insult to injury, when there is a claim on these insurances they want to deny the liability and they put people to very much trouble. I know a number of travellers who had genuine claims, who submitted the documents and were told these were the wrong forms although they got them from the insurance companies. Then when they completed the second set of forms these "got lost" and people got fed up and did not pursue their claims. That suited the insurance companies. It was a very easy solution for the companies. That is another rip-off and it should be investigated. When a person wants to travel and they go out with a company if they pay their insurance they should get compensation if they have a claim.
There was a recent case of a person flying out of Dublin with Aer Lingus. When they were loading the plane that person's luggage was taken aboard. They were going to Portugal for a golf outing. When they arrived in London there was a telex before them awaiting the person concerned from Aer Lingus to say that the luggage was damaged and to get it seen to by the other carrier which was British Airways who were taking it on from there. British Airways came along and bandaged up the baggage as best they could. These people continued on to Portugal and had their holiday. When they came home they put in a claim to Aer Lingus who said they never got the claim — even though they had notified the owner that the accident had occurred in their own plane. Apparently, two separate departments did not communicate with one another. The person tried on a number of occasions to get money from Aer Lingus who kept on passing the buck.
Now legal action is being taken. That is not good enough. If small companies do things like that we talk about back lane traders and the black economy but when you have the people flying the green bird doing it, it is a different story.
Senator Eoin Ryan referred to two insurance companies. He said there were two companies who offered cheap insurance and because of that they went out of business; if they wanted to stay in business they could not give cheap insurance. The truth is that one of the insurance companies, the PMPA — the old PMPA — went out of business not because of the insurance business but because of their other activities. They had something in the region of 30 garages in the country and they were the only insurance company in Ireland or the UK who ever decided to have garages to do their own work. The garages lost them buckets of money. Then they had their Friendly Society, the PMPS, where people invested their money. One man came from England and he put in £35,000, because he had sold his house and he wanted to build another one. When he came to build the other house he went to draw out his money and they told him: "Wait until the house is built and we will give you a bridging loan in the meantime". He said: "All right". They said: "You will gain on the interest". Then they came back and said: "We cannot give you a bridging loan but you go to the bank and get that". He took their advice and got the bridging loan. The PMPS went "burst" and now he has two loans to pay. He lost his £35,000 and he has to pay back the money he got and he will probably be paying it back for the rest of his life. That is one of the insurance companies.
The other insurance company was the Insurance Corporation of Ireland. That insurance company lost money. In their insurance offices in Ireland they were doing all right: they were making money but they had a couple of branches across the water one of them in London and it got to be known as the "soft touch" insurance company where anybody who had any kind of a risk could go in and get insurance. The result was that they paid out a fortune and then they had to go "burst".
We have to restore the balance in insurance for business. The cost of insurance should be a business cost like any other. In recent years too many other factors have come into play. We have to get rid of these factors and get back to the simple issue of liability insurance itself.
