Holiday claims risk becoming the new PPI, warns industry consultant Andy Cooper
When I qualified as a solicitor in the mid-1980s, there were around 30,000 solicitors on the roll. There are now about 135,000 practising solicitors as well as an increasing number of paralegals.
It has long been my view that the growth of the legal profession has exceeded the growth of the work available for all these lawyers, which has driven the claims culture which we today suffer, or benefit from, depending on your view.
Over the last 10 years a significant industry has grown up making claims against banks for miss-selling PPI insurance, as well as the lawyers this has spawned a whole industry of claims companies which bombard us with calls, clog up our email and invade our social media accounts.
That industry readjusted its sights a few years ago towards flight delay claims, encouraging us to seek compensation for three-hour flight delays, with the judiciary actively encouraging the growth of this market – particularly when it is simple to recover compensation in excess of the flight costs.
The claims companies seem to charge a remarkably consistent level of fee for this work – 25-30% of the damages recovered seems to have become the accepted norm – and when you see some of the numbers bandied around for the total amounts paid out, it’s not difficult to understand how a lot of people have got rich on the back of encouraging these claims.
If you have never seen this data, it is eye watering. The Financial Conduct Authority keeps data on PPI claims paid. For the four years from 2012, the annual figures are £6.3 billion, £5.3 billion, £4.5 billion and £4.5billion, with 25%-30% of that going to the claims companies.
I suspect that both of these claims markets are beginning to dry up. The government has announced it is going to cap future PPI claims in 2019, and the airlines increasingly recognise that the courts are against them however much they might argue about whether it is reasonable to consider one flight in 100,000 affected by a bird strike as not something extraordinary, so they are settling an increasing number of claims.
As a result, the claims companies and lawyers who have ridden the crest of the claims wave are having to turn their attention to new sources of income.
Increasingly, straightforward legal claims are now subject to fixed costs regimes. For obvious reasons, the lawyers want to find something relatively easy to argue where they are not subject to restrictions on costs.
Since the advent of the Package Travel Directive in 1990, which made tour operators responsible for all parts of the holidays they sell, and particularly since the growth in popularity of all-inclusive holidays in the late 1990s, the travel industry has seen a growth in claims for illness incurred during holidays. The argument is relatively simplistic:
• I booked an all-inclusive holiday
• I got sick during my holiday
• I spent all my time in my hotel – as my holiday was all inclusive, why would I want to go anywhere else?
• The cause of the sickness must therefore have been something caused by the hotel
• If I can also show that others at the hotel were sick at the same time, this must strengthen my case.
• I am therefore entitled to compensation.
What that argument fails to recognise is that there can be a variety of factors causing sickness during a holiday.
These can include changes in climate (if it is hot, people get dehydrated), changes in diet (an all-inclusive may encourage people to eat and drink too much), over-consumption of alcohol, changes in drinking water (which affect the bacteria we all have in our stomachs) and so on.
An expert in travellers’ diarrhoea estimates that staying in a different environment, such as a Londoner spending a week in Cornwall, can produce some form of sickness in 5% of cases owing to changes in the water.
The circumstances leading to the explosion of claims were that the industry grew rapidly in the Caribbean, particularly the Spanish Caribbean as well as Egypt, and it is true that sickness levels have been significantly higher in those areas.
The tourism supply chain – hotels, restaurants etc, are not entirely without blame in that hygiene standards can be less rigorous than in parts of Europe, and local populations do not always have easy access to clean water.
Nevertheless, the larger tour operators have spent huge amounts of time and money working with suppliers to improve hygiene standards and ensure a more rigorous approach towards information management so that a hotel can prove it is taking appropriate steps to ensure customers are not ill.
The last few years have seen the claims companies and an increasing number of lawyers looking at this area as an opportunity.
I was interested (irritated actually) to read on one solicitor’s website that “Illness on holiday is normally caused by food poisoning”. You would have thought solicitors would check their facts before making such a claim. There is not a lot of clear evidence on causes, but most experts believe that most cases of gastro-intestinal illness in travellers are caused by water, not food.
As well as the typical routes to market for claims companies – social media, website ‘calls to action’, advertising – the claims firms are getting increasingly aggressive and focussed on holidaymakers, with big banner adverts in airports, leaflets handed to holidaymakers in destinations, and holidaymakers directly targeted and encouraged to think that if they have been ill, it will be easy to secure substantial compensation.
One company has even claimed that if you have travelled on a package holiday and been ill, “We can definitely get you £2,500 each – with or without medical evidence”.
The travel industry, and lawyers and insurers representing the industry, have traditionally been reluctant to defend many of these claims – largely because of concern that claimant lawyers will run up massive costs and it is often cheaper simply to pay off the claim.
In addition, claimant firms often rely on weight of numbers. There is a fear that judges will accept the argument that, if more than one person has been sick, the cause must have been the hotel.However, the industry needs to prevent itself becoming the next sector financially penalised by the claims culture.
We need to demonstrate that the hotels we work with are generally taking the right steps, and only compensate those whose illness was genuinely caused by failings on the part of the hotel.
We should also encourage a change in the law to ensure lawyers stop getting rich by claiming disproportionate costs for holiday illness claims.
Let’s get a fair and balanced approach in our sector before it is too late. We don’t want holiday illness claims to become the next PPI.
[1] These are figures produced by the US FAA on the number of bird strikes causing some sort of aircraft damage