UK: Stress Claims : A Rolling Snowball Or All In The Mind?
The News Headlines Read:

The news headlines read:

• "A snapshot of the state of members in Warwickshire by the National Association of Head Teachers found that 40% of respondents had visited the doctor with stress-related problems in the past year, with 30% taking medication
• "A maths teacher who retired early owing to stress-related ill health was yesterday awarded more than £100,000 by the courts"

Those without an involvement in insuring schools may say "so what", but the incidence of stress claims is increasing across the board. After the Walker decision, some thought the floodgates would open but few claims were litigated. Over the last 2 years, however, there has been a marked increase in claims. Jim Prew of Norwich Union says his specialised unit has dealt with 460 stress claims since Walker decision, and claims are increasing.

The reasons for increased claims lie largely in increased public awareness of this type of claim, fuelled by CFA's. Publicity for settlements is enormous.

Whilst the number of stress claims is rising, they are still claims which are far more difficult for claimants to succeed in than most E.L. claims. Proving foreseeability of injury (rather than just upset emotions) is usually a major hurdle for claimants.

Insurers handling stress claims generally take a firm and challenging line, a tactic justified by high success rates. Derek Barnes of Zurich Municipal, one of the major insurers in the local authority sector, reports a high degree of success in repudiating cases. Nikki Barrett of St. Paul, also very active in that sector, reports the same high degree of success. Jim Prew of Norwich Union reports a 94% success rate across the board, including discontinued actions.

One example is a case heard in Newcastle in January. Mr. Laidler was a psychology lecturer at a college of further education. He claimed to be a victim of a concerted campaign because he refused to sign new contractual terms. He suffered a nervous breakdown after his office was demolished during refurbishment while some of his materials were inside. The court found he had ample warning of demolition and chose not to move his belongings during the previous. It was also found that a psychiatric injury could not reasonably have been foreseen.

One aspect of Laidler's claim was that he alleged that after he fell off work, his grievances were dealt with in a way either calculated to further injure him, or negligently in the knowledge that his injury was likely to be exacerbated. If successful, this would have put Laidler's claim on a similar basis to Walker case, namely a second injury at a time when the employer should have foreseen that the employee was vulnerable. The court dismissed that claim also, finding that the college had done the best they could in a very difficult situation (which included the claimant refusing to even meet the person appointed to deal with his grievance!).

What Are The Trends?

• Bullying and harassment. Some bullying cases have succeeded. The problem for the insurer is that once a court has found that an employer's behaviour amounted to bullying, harassment or victimisation, it is easier for the claimant to establish foreseeability.
• Employment tribunal claims. Increasingly, claimants are claiming unfair dismissal or discrimination in circumstances that may also lead to a claim for personal injury damages. More about employment claims below.
• Breach of contract. After a case of Gogay v Hertfordshire C.C, there have been claims involving allegations that an employer's conduct amounts to a breach of the duty of trust and confidence implied into a contract of employment. Gogay was a care worker suspended after a colleague talked to a child in her care, who was a victim of previous sexual abuse. It was decided to investigate Gogay's handling of the child. The council told Gogay that the child had made an allegation of sexual abuse. This was untrue, the investigation cleared Gogay but she had a breakdown as a result. The court found the employer in breach of its implied duty of trust and confidence in suspending her and dealing with the investigation in the way it did, awarding damages of £26,000.
• Other claimants are now starting to allege that their employers' behaviour is so bad as to cause that implied duty of trust and confidence to be breached. In such cases, it could be said that proving foreseeability of injury might be easier, although it would still be a significant hurdle.

The ABI is examining the potential overlap between personal injury liabilities and those arising from poor employment practices. (Post 22.2.01) This is an area of concern to the insurance industry, following a Court of Appeal case of Sheriff v Klyne Tugs (Lowestoft) Ltd. in 1999.

The claimant sued in the tribunal for racial discrimination. That claim settled for £4,000, the agreement stating that this was in full satisfaction of all claims over which a tribunal had jurisdiction. In a subsequent claim for personal injuries on the same facts, the Court of Appeal agreed that the claim should be struck out because the agreement covered the personal injuries claim, and it was an abuse of process to bring a second claim. The Court found that because a tribunal had power to make an award for injury to feelings, the settlement covered the claim for psychiatric injury.

This will not trouble insurers in many claims because tribunals can only award compensation for injury to feelings in cases involving discrimination, e.g. race, sex or disability. In such an issue, however, the E.L. insurer may pick up the tab for the "injury" element of a tribunal's award, even though underwriters may not have envisaged this. In such cases, compensation can be awarded even where the "injury" does not pass the threshold test of being a recognised psychiatric injury. In a case of "mere upset", not compensatable in a P.I. claim, thousands may be awarded.

The following figures demonstrate the potential scale of the problem:

• The average compensation award in race discrimination cases between 1998 and 1999 increased by 65%
• The average award for injury to feelings in 1999 was £4.060 (an increase of about 25% on 1998)
• In one sex harassment case, the injury to feelings award was £23,000.

There are potential problems here for an insurer who does not investigate early because no claim is made on the E.L. policy. The tribunal claim has to be brought within 3 months, so little opportunity is given to investigate unless the insurer is notified immediately. Expert representation at the tribunal my not be arranged. Factual findings may be made at the tribunal, which, arguably, may not be capable of challenge in a subsequent claim. The insurer may have to pay under the E.L. policy, with no chance of challenging the medical evidence.

What can the insurer do? Increasingly, employment practice policies are being underwritten. Where this is not the case, insurers need to encourage insureds to immediately notify them of any employment claim where stress, bullying, harassment or discrimination is alleged so that the insurer can protect its position and, possibly, take over handling of the claim.

Stress related litigation is on the increase, but a co-ordinated approach to such claims can (and does) lead to a successful defence of a high proportion of claims. Proactive and early investigations are essential, and a firm line seems to work in most cases. Some cases need to be settled, and the challenge then, apart from damage limitation, is to try to avoid adverse publicity for the insured.