Analysis: NIHL: Make some noise

As the easy money from whiplash claims has become harder to come by, claims farmers have switched their attention to noise-induced hearing loss.

With all guns blazing, some targeted employers of firms where noise could have been an issue, some offered free audiograms with limited questions about employment history, and others cold-called in the hope that the individual answering the phone could have some problems with their hearing.

The fact that many people hear less well as they get older, regardless of their past activities, was not an issue for them. The goal was claim and gain.

Check Point Claims, for instance, made more than 17 million nuisance calls. Based in Blackburn, the claims management company played a recorded message encouraging people to claim compensation for job-related hearing loss. The Information Commissioner’s Office fined it £250,000 last year. The business since went into liquidation.

While single defendant NIHL claims go through the Ministry of Justice fixed costs portal, the majority of NIHL claims are multi-defendant, meaning they fall outside. As such, these claims would be subject to hourly billing and could often mean that the costs would outstrip any damages paid.

The first quarter of 2015 saw NIHL claims peak at 87,000. Since then, numbers have been coming down – and while business is still being touted for, efforts are far more subdued.

However, NIHL is now in the news following the publication in September of a report from the Civil Justice Council, produced by a working party led by Andrew Parker, partner at DAC Beachcroft. This makes a number of important recommendations, including the introduction of fixed costs in more cases.

It recommends that pre- and post-litigation costs should add up to no more than £9187 for one defendant, £10,724 for two and £12,261 for three defendants.

It also stresses that evidence should be provided in the form of: an audiogram produced by a suitably experienced and approved provider; a schedule of employment from HM Revenue and Customs; and search results from the Employer’s Liability Tracing Office.

Some claims, which will typically be more complicated, will be excluded from the fixed costs regime, including military claims, those where the value exceeds £25,000 or where there are more than three defendants.

Parker says he wants above all the recommendations to be fair and the system to reward efficiency. “Both sides need to improve and better supporting information supplied with a claim should be met with a better response from the insurer, there has to be a trade-off,” he emphasises.

Parker was appointed in the summer of 2015. With the report recently published and a consultation now expected, it has taken time for lasting solutions to be put forward. So has it come too late?

Overall, insurers and defendant lawyers are strongly supportive of the recommendations, although the view that it is shutting the stable door after the horse has bolted is not uncommon.

Peter Kenworthy, partner at Keoghs, says: “Early 2015 saw a tidal wave of claims. They had trebled over about 12 months but because so many were repudiated, claimant lawyers realised this, and so we have seen a tailing off. The message was sinking in, including claims being refuted for fundamental dishonesty. And even when the insurer would ask for a second audiology report, for example, the claim would often go away.”

Ian Macalister, partner with DWF, agrees that the recommendations are fair and will help reduce fraud at an earlier stage, in turn reducing cost for insurers. “These claims often have a low monetary value but are complex and time-consuming. Often there was no negligent exposure but while so many are withdrawn without payment, there has still been the cost for the insurer.”

NIHL claims are not new. Ian Hollingworth, head of claims for ECIC, explains that as a specialist for the construction sector, the insurer has been experiencing such claims for over 30 years. “These cases have always been part and parcel of the claims you would expect as an underwriter of contractors working in noisy environments. But in the past few years, we experienced an increase.

“While control of noise levels is a particular issue in the construction sector, the general population of people suffering with NIHL had not suddenly grown. The only other explanation for the rise was a heightened focus on NIHL claims by claimant lawyers looking for new revenue streams following the introduction of the portal.”

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Welcomed proposals

Hollingworth says the new proposals are welcomed: “A detailed letter of claim with an audiogram from an accredited audiologist and a schedule of employment from HMRC will certainly help weed out the dubious claims from the legitimate.”

Although referral fees have been banned, some question whether the ban is being properly policed and suspect claimant lawyers of paying claims farmers for passing on leads. Questions have also been raised as to the fitness of some of the audiologists and whether they are in cahoots with claimant lawyers.

Gavin Bridges, head of legacy at QBE, says: “While there are genuine claimants for work-related hearing loss and we want to ensure these claims are dealt with fairly, in others, there was a racket going on and the sheer numbers caused problems.

“Far too many were clearly put together in a rush and were based on claimant lawyers targeting a particular workforce they thought might be affected by hearing loss issues, rather than making proper checks. With accredited audiology and a schedule of employment through the new proposals, at least we should start to see the quality improve.”

Jim Byard, partner at Weightmans, adds: “The proposed accreditation scheme for audiologists is potentially significant. Unreliable audiometry has been a feature of NIHL cases. But much depends upon how the accreditation scheme works in practice. Overall, if all these measures mean that claims are more appropriately vetted, this could lead to lower levels of litigation.”

NIHL claims have been called ‘the new whiplash’ but although claimant lawyers may have initially believed this, the reality is somewhat different. As Byard says: “There was a significant rise in NIHL claims between 2013 and 2015, which attracted comparison with volumes of claims seen for whiplash. However, here the similarities end. In fact, unlike whiplash claims, significant numbers of NIHL claims were successfully repudiated on limitation, causation or breach of duty grounds.”

It certainly must have been a rude awakening for some claimant lawyers if they expected huge amounts of revenue to roll in through NIHL. Although some insurers may have chosen to settle early if the amount was low, there is no doubt that most took a rigorous approach to repudiation.

Mark Merrix, head of casualty for Allianz, says insurers’ resolve has played a big part in reducing claim numbers. “The claims are still here but are now at more sustainable levels. But even at their peak, we were repudiating about 90%.”

He says many claims did not make it to first base because of the way they were presented, with little or no evidence to show causation. ”Claims were coming through based on referral fees with little screening by the solicitor. The claimant may well have some hearing loss, but it could be age-related and, without clear evidence that it was connected to their employment, it can’t proceed. Insurers would then have to run their own tests, and with most of these claims, there was little trust. There were no winners.”

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Declining claims

Toby Scott, partner at Clyde & Co, says that, because NIHL claims are declining from such a high base, there is still enough of them in the pipeline to remain problematic for insurers. He adds that while claims farming has not gone away, there have been lessons learned and hopefully, claims will now be triaged better.

“It has now been shown that many of these claims failed and lawyers were grossly inflating costs,” he says. “This was a model that did not stack up and with the new reforms, we should now start to see quality improve and volumes reduce further.”

Scott adds there was a clear example of NIHL claims brewing up trouble as seen by the Slater and Gordon buyout of Quindell’s professional services division.

Arguably, a big falloff in NIHL claims could also be negative for some defendant lawyers and loss adjusters, who have worked effectively at helping insurers repudiate claims – many insurers will have needed to work with partners because they had insufficient resources in-house.

Stuart McLean, major and complex loss director for Questgates, has seen many claims and agrees that standards must rise. “There needs to be confirmation that the claimant is indeed suffering from hearing loss in the first place. Currently, some claimant lawyers simply take the word of their client and submit a claim, which then has to be investigated.”

Most effort to drum up NIHL business has been around businesses that are likely to have had high levels of noises, particularly before higher health and safety regulations came in. But could claims farmers start fishing in other pools?

McLean says noisy factories and building sites still comprise the majority of workplaces but says pubs and clubs might also be brewing future claims.

While claimant lawyers primarily targeted heavy industry, others simply invited anyone who thought they could be affected to have a go at claiming. “We certainly are seeing claims from the elderly who have been spurred into action by TV ads and cold calling,” Mclean says.

Scott reports he even saw a claim from a woman who said she’d been affected while working in a tanning salon.

The Control of Noise at Work Regulations 2005 came into force in the music and entertainment industry in 2008, putting an end to the sector’s exemption. So there may be more claims bubbling under here, although there is still the limitation period of three years in which to bring a personal injury claim.

Meanwhile, Rebecca Payton, head of occupational disease at Davies Group, agrees that reform was required. With typically £3 paid in legal fees for £1 in damages, NIHL claims are often dysfunctional, she notes.

“Claimants had sometimes been encouraged into the process with little understanding of where they stood. The advertising around this was highly misleading and even when damages were paid, the amount was on average £3100. What is more, some lawyers were paying for leads and there is no doubt NIHL claims needed these reforms.”

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Genuine claimants

But what about genuine claimants? Have they been treated fairly or made to feel they are fraudsters?

Nigel Cragg, head of personal injury at Setfords Solicitors, has represented claimants. “Insurers have taken premiums on this risk for many years and have known about the injury risk to employees since the early 1960s,” he says.

“While the trend is towards fixed fees, this is largely due to arguments of proportionality. Damages for injury have not kept up with inflation over the years, but lawyers’ operating costs have. Therefore their charge rates have reflected this, with margins for lawyers severely curtailed.”

He says damages for this area of injury “are generally low and so claimants cannot afford to employ lawyers. Therefore, work has to be done on a no-win-no-fee basis.”

Cragg adds an independent study fixed success fees at 62.5% of base costs prior to April 2013, when they were payable by defendants. “Now they are no longer and so insurers are already saving significantly and claimants are picking up the bill.”

He continues: “The impact on claims will certainly mean some justifiable claims will not be brought due to economics assisting insurers’ shareholders reducing access to justice. NIHL is a highly specialist high-risk area, unlike whiplash, and although some firms have attempted this, the specialism is such that it is doubtful it will reflect that trend.”

While some work environments were deleterious, especially before the regulations, some NIHL claims were obtained by unseemly means and even with efforts to skew results. Cameron Clark, partner at Kennedys, reports: “I’m aware of cases where a claimant firm hired a hotel room next to a motorway to do the audiology testing.”

Hardly surprising then that insurers came down hard on them. “Insurers were swamped and had to outsource claims they would have normally handled themselves. These claims clogged up the system and although it has come late, these recommendations are a better framework and have much to commend, even if we could have done with them much earlier.”