Amsterdam Interdisciplinary Centre for Law and Health Amsterdam Interdisciplinary Centre for Law and Health (IGER) Working Paper Series No 2009/01 Reforming personal injury claims settlement: paying more attention to emotional dimension promotes victim recovery Present settlement process focuses so strongly on financial compensation that victim’s recovery does not receive the priority it deserves Arno J. Akkermans a.j.akkermans@rechten.vu.nl Electronic copy available at: http://ssrn.com/abstract=1333214 Amsterdam Interdisciplinary Centre for Law and Health (IGER) VU University Amsterdam De Boelelaan 1105 1081 HV Amsterdam The Netherlands Reforming personal injury claims settlement: paying more attention to emotional dimension promotes victim recovery∗ Present settlement process focuses so strongly on financial compensation that victim’s recovery does not receive the priority it deserves Arno J. Akkermans∗∗ Key words: Tort, Personal Injury, Claims settlement, Reform of settlement process, Compensation, Victim recovery, Non-pecuniary needs, Secondary victimization, Procedural Justice, Therapeutic and antitherapeutic effects. Abstract The Dutch Ministry of Justice commissioned the VU University Amsterdam to investigate the needs, expectations and experiences of victims and their relatives with regard to the settlement of personal injury losses. This study shows that most victims are concerned with needs of a nonpecuniary nature in addition to financial compensation. Even if the most important reason for taking action is financial in nature, non-pecuniary needs play an important role. Much goes wrong, however, when it comes to meeting those needs. Nevertheless, in contrast to what is often assumed, civil liability law has certain characteristics which actually make it quite suitable for meeting the non-pecuniary needs of victims. This positive potential is not realized, however, due to the fact that the current practice of handling personal injury claims focuses almost exclusively on financial compensation. This is all the more problematic as the failure to meet these non-pecuniary needs is not only experienced as frustrating, but also constitutes an impediment to recovery, while in the field of personal injury the law holds that recovery takes precedence over compensation. The study concludes that by paying insufficient attention to the non-pecuniary needs of claimants, current liability law fails to pursue its own restitutionary goals. This state of affairs calls for reform of the claims settlement process, to which end some tentative suggestions are made. See the research report: R.M.E. Huver, K.A.P.C. van Wees, A.J. Akkermans, N.A. Elbers, Slachtoffers en aansprakelijkheid. Een onderzoek naar behoeften, verwachtingen en ervaringen van slachtoffers en hun naasten met betrekking tot het civiele aansprakelijkheidsrecht, Deel I, Terreinverkenning, Den Haag: WODC 2007 [Victims and liability. A study of needs, expectations and experiences of victims and their relatives with regard to civil liability law, Part 1, Exploration of the Field] English summary can be downloaded at www.wodc.nl/ > search term: slachtoffers en aansprakelijkheid. 1. Introduction The catalyst for this study was the discussion in and outside Dutch Parliament surrounding a Bill of Law introducing a right to compensation for the emotional harm suffered by secondary victims, i.e. ∗ This is the English translation, slightly adapted to foreign readers, of a presentation held at the Dutch Insurers’ Institute on Personal Injury [‘Stichting PIV’], published earlier in the Dutch language article: ‘A.J. Akkermans, Meer aandacht voor emotionele dimensie komt herstel van het slachtoffer ten goede’, PIV Bulletin 7, december 2007, p. 1-6. ∗∗ Professor of Private Law, VU University Amsterdam 1 the relatives of victims who suffered fatal or severe non-fatal injury as a result of traffic or workplace accidents, medical malpractice and violent crime. Yet the study also involved the more general questions of what victims and relatives aim to achieve by pursuing personal injury claims, and which considerations are made in that context. Research was conducted into the question of how the personal injury claims procedure was experienced and attention was paid to the extent to which the settlement process provided for the needs of victims and their relatives. A larger scale follow-up study later addressed several questions more directly related to the bill on the emotional loss of secondary victims, but that part of the research will not be discussed in this paper. The study was carried out by a multidisciplinary research group of the Amsterdam Interdisciplinary Centre for Law and Health (IGER) of the VU University Amsterdam and the VU University Medical Centre. It comprises the results of literature study, meetings of experts working in settlement practice, and 61 interviews with personal injury victims, victim’s relatives and surviving relatives. 2. Financial compensation and needs of a non-pecuniary nature The study makes clear that there is no conflict between the desire for financial compensation and needs of a non-pecuniary nature, such as acknowledgment and satisfaction. Both needs are often closely intertwined. The main determinant for the need for financial compensation appears to be the degree to which the consequences of the accident threaten financial subsistence. Victims want to get their lives back on track and the safeguarding of financial subsistence is an indispensable precondition in this respect. In addition, however, non-pecuniary needs also played an important role for all the victims and relatives interviewed. The concept of ‘acknowledgment’ is the key element in this context, and while participants did not always actually use the word ‘acknowledgement’, a need that can be labeled as such was often present, although it took on different forms in different people. Among other things, the concept of acknowledgment was associated with the need for recognition of the opposing party’s liability; acknowledgment of what had happened – by the opposing party and by the victim’s own social environment; the opposing party’s admission that he or she was at fault and realized what the consequences of that fault are for the victim; and the need for sympathy and apologies. Other non-pecuniary needs are: establishing what precisely has happened, obtaining justice, and wanting to prevent the same event happening to someone else. The needs of a non-pecuniary nature that emerged from this research are shown in the table below. 2 Non-pecuniary needs of victims and their relatives A. Specifically by the opposing party • that he was at fault • that he realizes the consequences for the victim • by offering apologies • by his making the situation as bearable as possible 1. ‘Acknowledgment’ B. By the opposing party, the outside world and the victim’s own social environment • of what has happened to the victim • by being taken seriously • that not the victim, but the opposing party is responsible • that the opposing party is liable C. By the receipt of financial compensation 2. 3. 4. 5. 6. Wanting to know what precisely happened Calling the opposing party to account Not wanting to suffer for someone else’s error Wanting to obtain justice Wanting to prevent the same thing from happening to someone else Figure 1. Non-pecuniary needs of victims and their relatives 3. Psychological aspects of the personal injury claims settlement process With regard to the psychological impact of liability proceedings, there are a number of scientific theories that identify therapeutic and anti-therapeutic effects of the personal injury claims settlement process. The study of the VU University confirms the outcomes of previous studies in this field in other countries. Secondary victimization In addition to the injury or the pain and grief which a victim suffers as a consequence of the event which caused loss, the personal injury claim process can be a burden in itself, in the sense that the victim feels engaged in a process over which he has no control, containing elements which he experiences as stressful, offensive or even degrading. This is referred to by the term ‘secondary victimization’ and can be described in relation to liability law as repeat victimization as a consequence of the personal injury claim process. Expressions sometimes used in this context are ‘the disaster after the disaster’ or ‘the accident on top of the accident’. This phenomenon can lead to stagnation of the victim’s recovery process or to aggravation of the consequences of the accident. Factors involved are matters such as the lack of adequate information; the feeling of having no 3 control over the settlement process, which may or may not be connected with a feeling of no longer being in control of one’s own life; the negative experience of the treatment received from the opposing party; and the perception of the opposing party as impersonal, cold, cynical and only bent on minimizing the amount of compensation as much as possible. Striking in this context is the important role of something as simple as adequate information. One of the characteristics of victimization is the feeling of powerlessness resulting from the accident. It is of crucial importance that this feeling of powerlessness is not fortified by the personal injury claims settlement process. Adequate information would appear to be a precondition for avoiding this negative effect, but things are apparently going wrong already with this very first aspect of the practice of handling personal injury claims. Secondary gain Apart from the mental stress of the procedure, the settlement process can also have an antitherapeutic effect since being entangled in this process can constitute an incentive for remaining ill. The process draws claimants into a conflict of accusations, in which what has happened to the victim becomes a justification to shift his personal responsibility to make something of his life on to the accident, the party liable or, more in general, on ‘them’. Some injured parties become so involved in their role as the victim that they seem to loose all other prospects than being a full-time victim. In the medical tradition mechanisms of this kind are referred to by the term ‘secondary gain’. This term denotes the commonly unconscious tendency that people have to enlarge their symptoms when confronted with potential gain of a financial, social or psychological nature. It should be noted that personal characteristics and those of the victim’s own social environment play a significant role in this respect. Procedural justice Another important psychological perspective is that of ‘procedural justice’. People’s perceptions of justice are strongly influenced by process-based factors and the manner in which decisions are made. The outcome of the proceedings is much less decisive in this respect than generally assumed. Important determinants of people’s perception of justice are the opportunity to tell their side of the story; participation in the decision-making process; fairness, respect, appropriate questions, trust, friendliness, openness; justification by the opposing party of his conduct in the interaction; and – in the event that a third party must judge – confidence in the neutrality of the decision-maker. The determinants of procedural justice prove to be essentially the same in every context, even if their concrete manifestation is obviously determined by that context. This is important for the personal injury claims settlement process, because many personal injury claims (in the Netherlands a majority of over 95%) are settled out of court. There can be no doubt that the insights of procedural 4 justice theory also apply to out-of-court settlement. The specific forms taken on by the determinants of procedural justice in this context are fairness, respect, appropriate questions, trust, friendliness, openness and the justification by the opposing party of his conduct in the interaction. 4. The positive potential of liability law One of the study’s important findings is that certain characteristics of civil liability law, such as the adversary character of the procedure, the autonomy of the parties, the opportunity to call the defendant to account, and the opportunity to tell one’s own story, are consistent with the determinants of procedural justice. Liability law appears to have a clear positive potential in comparison with alternative compensation systems such as no fault systems (social security) or first party insurances. The positive potential with regard to the non-pecuniary needs of victims and their relatives is outlined below. Positive potential of civil liability law with regard to non-pecuniary needs 1. Adversary procedure 2. Formal nature (especially of court proceedings) 3. Institutional legal rituals (both in- and out of court) - the right to be heard - the hearing of both sides of any argument - the right to confront adverse witnesses and experts - the right to call one’s own witnesses and experts • • • • • • • maximize the opportunity to confront the wrongdoer maximize the opportunity to tell one’s own story maximize the opportunity to participate maximize the victim’s personal opportunity of exerting influence on the outcome grant the victim dignity and respect express the importance that society attaches to the case increase confidence in the correctness of the outcome Figure 2. The positive potential of civil liability law with regard to non-pecuniary needs of victims and their relatives It should be emphasized that this positive potential not only applies to proceedings in court, but can also be realized in negotiating situations, such as a professionally organized out-of-court settlement. However, court procedure appears to be able to offer the most advantages in this respect. 5. The personal injury claims settlement process falls short in pursuing its own objectives It is obvious from evidence that the positive potential referred to above is not realized (in full) in most cases. To a minor extent, this seems to arise from the same characteristics of liability law that were identified as positive above, such as the opportunity of confronting the perpetrator. This ‘opportunity’ seems for example to be coupled with the ‘risk’ of far going polarization of the 5 relationship between the parties. However, it appears that a greater cause of the negative experience of victims with regard to their non-pecuniary needs is that in the everyday practice of handling personal injury claims, remarkably little attention is paid to the emotional side of it all. The whole adjustment of personal injury losses is generally typified as focusing almost exclusively on financial compensation. The quantification of the amount of the compensation to be paid – that is the true crux of the settlement of personal injury claims. Bringing that objective closer is the basis on which the professionals involved are assessed and remunerated, and that is what the court is called upon to do when parties fail to reach a mutually satisfactory agreement. It may be concluded that a striking discrepancy exists between this virtually exclusive focus on financial compensation on the one hand, and the great importance that victims and their relatives attach to needs of a non-pecuniary nature on the other. This discrepancy is all the more striking when one takes into account that the failure to fulfill these non-pecuniary needs is not only experienced as frustrating but also as an impediment to recovery, while in the field of personal injury the law holds that recovery takes precedence over compensation. The conclusion of the study is therefore that by paying insufficient attention to the non-pecuniary needs of the claimants, current liability law fails to fully pursue its own restitutionary goals. Discrepancy in the personal injury claims settlement process The virtually exclusive focus on financial compensation The great importance that victims attach to needs of a nonpecuniary nature This discrepancy is all the more problematic because of the following: Failure to fulfill non-pecuniary needs Promotes Secondary victimization Secondary gain Impedes recovery Fulfilment of nonpecuniary needs Promotes procedural justice Promotes recovery And this while recovery should take precedence over compensation! Figure 3. The discrepancy in the personal injury claim process 6 6. Towards a settlement process that does justice to the financial and non-pecuniary needs of the victim The conclusion that current practice is far from optimum has no effect on the good news that liability law as such does indeed offer an appropriate framework within which the non-pecuniary needs of victims and relatives can be met. Now his is an idea that – given the attention that has rightly been paid to the stressful aspects of the personal injury claims settlement process in recent years – many people will need some time to get used to. The Dutch Minister of Justice demonstrated this when he presented the results of the study on the occasion of the opening of the register belonging to the Dutch Code of Conduct for the Handling of Personal Injury Claims [‘Gedragscode Behandeling Letselschade’]. The study helps to dispel a common misperception, according to the Minister. ‘Many people – and the Ministry of Justice too, to be honest – consider that liability law generates conflicts and that this results in polarization and the risk of escalation of the claims settlement process. But according to this study it is more the other way around. There is actually nothing wrong with liability law: it is shortcomings of the claims settlement process that generate conflicts. Certain characteristics of liability law are eminently suitable for meeting the non-pecuniary needs of victims and relatives, examples being the adversary nature of the procedure, the autonomy of the parties, the possibility of holding the defendant to account and the opportunity to tell one’s own story. At the same time, present practice in the personal injury claims settlement process is so strongly focused on financial settlement and so little attention is paid to the emotional aspects of the case that little of this positive potential is realized. The researchers remark in this connection that a striking discrepancy exists between the focus on financial compensation on the one hand, and the considerable importance that victims and relatives attach to non-pecuniary needs on the other. This is all the more problematic because the parties involved may experience the failure to fulfill nonpecuniary needs as stressful and even as an impediment to recovery. And this underlines once more the gains we can realize with reforming the personal injury claims settlement process.’ As we can see, according to the Minister the study challenges us to reform the personal injury claims settlement process. The study attempts to contribute to such reform by presenting a theoretical framework to categorize positive and negative aspects of the personal injury claims settlement process. Aspects that meet the non-pecuniary needs of victims and relatives seem to correspond to a large extent with aspects that determine the perception of procedural justice and are 7 experienced by the parties involved as positive and promoting their recovery. Vice versa, aspects that frustrate the satisfaction of the non-pecuniary needs of victims and relatives seem to correspond to a large extent with aspects that foster secondary victimization and are experienced by those involved as negative and impeding recovery. By and large, it seems possible to regard the positive aspects referred to here as the opposite of the negative aspects referred to. On this basis, the study classifies these aspects as follows: Positive aspects Being provided with adequate information (in terms of content, comprehensibility, dosing and timing) Participation in and control over the settlement process Negative aspects The feeling of not being provided or being insufficiently provided with information The feeling of having no control over the settlement process Perpetrator/opposing party avoids direct contact Opportunity to tell one’s own story concerning the emotional dimension Unnecessary polarization of the relationships Being able to confront the wrongdoer between the parties The feeling of not being taken seriously, of being Respectful and dignified approach mistrusted and not being believed. The necessity of undergoing repeated medical examinations Perception of the opposing party as impersonal, Friendliness, openness and justification by the cold, cynical, and solely bent on minimizing the opposing party of his conduct in the interaction compensation as much as possible Confidence in the impartiality of the decision The feeling of also losing out in court to the when a third party has to decide the dispute omnipotence of the insurance company Figure 4. Positive and negative aspects of the personal injury claim process The above constitutes a tentative and rough theoretical framework that allows understanding and assessment of the characteristics of the personal injury claims settlement process from a therapeutic perspective. The scientific basis for this theoretical framework was further problematized in the study. The conclusion is that sufficient evidence exists, but it will surprise no-one that the researchers observe that further empirical investigation is required. 7. Possibilities for improvement Regarding concrete steps that could be taken to improve the satisfaction of non-pecuniary needs of victims, and to assign to the promotion of their recovery the priority it deserves, the results of this study are relevant in several ways. In the first place, the study offers support to existing initiatives (such as the Dutch Code of Conduct for the Handling of Personal Injury Claims) which aim to put the victim at the centre stage and improve communications between the parties. It does this, however, from a specifically therapeutic perspective, which is that these measures will aid the victim’s recovery. In the second place, the research results call for further perusal of the chosen 8 courses of action. Much more can be achieved than attempted and it is highly desirable that further possibilities are effectively explored. In addition, the study introduces a new element into the discussion. Putting recovery before compensation means that it actually is a legal imperative for all parties to take account of the emotional dimension of the personal injury claims settlement process in such way that the victim’s recovery is facilitated to the greatest possible extent. This applies to insurers and victim’s representatives alike, whether they have declared their intention to abide by the Code of Conduct or not. The results of the investigation make it clear that improvement of the provision of information is a precondition for a positive change in the way victims experience the personal injury claims settlement process. Information must be adequate with regard to content, accessibility, comprehensibility, dosage and timing. Both the victim’s representative and the insurer fall short when the supply of information is inadequate. Promising, in this context, are recent initiatives of several parties on the market, introducing the use of digital dossiers that the victim can access via internet. Another aspect that has been shown to be of major importance in achieving a therapeutically structured settlement procedure is the personal contact between victim and insurer. The Code of Conduct already provides for more personal contact by means of intake interviews and ‘plenary meetings’, while Insurance Industry Regulation 15 [‘Bedrijfsregeling 15’] also contains various provisions intended to encourage personal contact. It is of great importance that insurers increase the approachability of their organizations and build personal contact with the victim into the whole settlement process in a well-balanced manner. The anonymity of ‘that vast concrete building with those gleaming windows’ should be done away with. In the interest of their clients, victim’s representatives can be expected to support this as much as possible. Furthermore, it would seem advisable that training courses for claim handlers should pay more attention to the treatment of victims and the sensitive moments that can occur during settlement of a claim. Empathetic reflections on the victim’s suffering should not be seen as unprofessional, quite the contrary, in fact. Correspondence is another aspect where substantial improvement can be achieved. Much of the standard correspondence used is primarily drafted with the victim’s representative as the addressee in mind, and has not been constructed from the perspective of the victim who receives a copy. The key requirement is not only more tactful formulation, but also making the insurer’s perspective clearer to the claimant, and providing insight into the considerations the insurer has to take into account and the factors he needs to weigh up. Insurers 9 should always state clearly and comprehensibly why certain information is essential, certain steps necessary, certain standpoints taken. It should be mentioned that this area of improvement also involves a challenge for victim’s representatives. In the interest of his client’s welfare, a victim’s representative should refrain from making unnecessarily negative observations about the insurer. The reality seems to be rather diverse on this point. A report of the ‘Stichting De Ombudsman’ contains the following quotation. ‘When the lawyer heard which insurance company was involved, he said ‘Well madam, be prepared for a long fight. This insurer takes no prisoners.’ With such an introduction there seems to be little chance that the victim in question will ever be able to acquire the impression that justice has been done, regardless of how her case is actually settled. This is not how things should be done. In the interests of their own clients, victim’s representatives must resist the temptation to pass the buck unnecessarily to the insurer. 8. In conclusion The study offers important insights into therapeutic and anti-therapeutic mechanisms that play a role in the personal injury claims settlement process. It is important to realize that these are not the conclusions of well-meaning, but impractical, idealists. The results of the study have potentially serious consequences because the liable party and the legal representative are legally obliged, in principle, to implement anything that has proven to be beneficial to the victim’s recovery. Recovery takes precedence over compensation. For insurers there is also a financial motive, of course. Investment in a ‘better’ claims settlement process should also be profitable in principle, although it will be obvious that this will not always be visible in an individual case. At an aggregate level, however, it should be possible to recover more than the extra costs by reduction of the total amount of damages awarded. The time has come for a settlement process in which recovery really is the number one priority! 10