The legal profession must shoulder some of the responsibility for the excessive cost of public liability insurance, according to Irish Hotels Federation president Michael Lennon (pictured).

Speaking at the IHF AGM and conference this week in Galway, the IHF president added that the high cost of public liability insurance is threatening the viability of many businesses, including some in the hotel sector.

Lennon maintained that the legal costs associated with administering claims are so high they are having a “hugely detrimental impact on the proper administration of justice”. He added that the legal profession could do more to reduce the number of fraudulent and exaggerated claims coming before the court, which were adding to the high cost of insurance.

“The pace of insurance reform continues to be painfully slow. We welcome the establishment of the Personal Injuries Guidelines Committee and are hopeful that it will lead to more realistic awards for the future,” said Lennon.

“However, in the meantime, excessive insurance premiums are continuing to hurt many businesses, with a significant number of hotels this year paying over €1,000 per room. For an industry that is so price-sensitive, this level of cost is completely unsustainable.”

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Lennon added that the hoteliers had no issue with genuine claims where guests were rightly compensated. “However, at present, the scales of justice are tipped firmly in favour of the plaintiff and this cannot continue. The exorbitant fees being charged by lawyers are deterring insurance companies from pursuing cases through the legal system.

“According to figures from the Personal Injuries Assessment Board, only 1,800 – or 5% -- of personal injury claims were settled through the courts, whereas 24,700 or 74% were settled by insurers or abandoned.

“It’s not unheard of for a plaintiff’s legal costs to be triple the amount awarded to them, so not surprisingly insurers often prefer to settle a claim before it goes to court, rather than risk running up a sizeable legal bill. But where is the justice for the defendant, who ultimately ends up with a significant hike in their insurance premium?”

Greater Scrutiny

Lennon suggested that there was a need to improve access to civil justice and to increase the scrutiny of insurance claims to help deter fraud. The IHF president also suggested that greater scrutiny of claims at an earlier stage in the legal process could also help to “weed out the opportunistic and exaggerated claims that are still making their way to the courts”.

“When a case collapses in court due to expert evidence showing injuries were exaggerated, one can’t help but wonder whether the plaintiff’s lawyer could have made a better effort at establishing the bone fides of a case before it went to court, saving time and money for the defendant and their insurance company, as well as freeing up the courts system,” Lennon stated.