The common law operates to a set of very clear standards each of which can be informed by objective evidence.
- Indemnity – the injured recover only what they have lost.
- Causation – only those who caused the loss should provide indemnity.
- Liability – could the cause have reasonably been prevented?
- Burden of proof – it is for the Claimant to make out his case.
- Balance of probabilities – if a fact is more likely than not then it is a fact. If not, then it must be discounted in the narrative.
- Mitigation – must be aimed at reducing indemnity.
- Objectivity – what would the reasonable man think
When these standards are tested, the business of insurance becomes less efficient.
For example: One of the key current challenges to the common law is the concept known as material contribution. Harm can sometimes have multiple causes but the question is did a breach of duty make a material contribution to the harm done? There are different answers depending on whether the harm is cumulative in some way e.g. industrial deafness, or, indivisible e.g. cancer. Experts are called to explain the science to the court and the court makes its own best judgement, using the principle that facts are decided by the balance of probabilities test. It is for the Claimant to show that the alleged breach of duty could make and actually made a measureable difference to the risk of harm and that this was sufficient in this particular case.
Unfortunately, the courts have been allowed to create a number of precedents where exposure to hazard is regarded as equivalent to material contribution. The Claimant need merely show that the hazard was present and material contribution is assumed. This position is fragile and probably unjust. It leads to enormous uncertainties in insurance risk management.
There is however, a reliable way to support the balance of probabilities test…the principle behind this has been tested in an excellent judgment Parkes v Meridian. Further detail is in the Radar database.
Sensationalism does have a role in decision-making, it challenges orthodoxy and can provide the impetus for change. We recognise that but don’t employ sensationalism ourselves.