… but that doesn’t necessarily mean you have to pay for them. In an increasingly prevalent compensation culture, we find out why contractors are feeling sick over payouts – and looks at some classic fast ones pulled by industry opportunists.

A construction labourer in South Wales claimed that he could not do heavy work that week because he had injured his back on site. He soon issued a compensation claim to the company. It then came to light that he had also been hauling sacks for a local coal merchant, after which this opportunist admitted that the injury was a result of his extra-curricular activity.

This happened in the early 1980s, when such cases were either urban myths or quirky news items for the tabloids. These days, though, such claims are part of a full-scale social trend, heading in the direction of a “compensation culture”. Construction seems particularly prone, be it the case of the site lorry driver who claimed to have broken his ankle yet was seen driving his lorry or the gentleman who put his broken finger down to an on-site accident rather than trapping it in his car door.

A recent report to the government dismissed the so-called compensation culture as a “myth”, yet there was a three-fold increase in personal injury insurance claims across industry between 1998 and 2002 to £950m, according to the Association of British Insurers (ABI). The insurance companies pass this cost back to industry. The claims and insurance payouts hit low-margin contractors hard, particularly the smaller construction firms that bid for lowest-cost tenders.

The Federation of Master Builders, which represents these smaller contractors, is already sounding the alarm. Ian Davis, the FMB’s director-general, says: “Over the past two years, some of the high-risk trades, such as roofers and scaffolders, have seen their premiums more than double.”

Even more worryingly, he adds that large numbers of small, high-risk contractors are struggling to get employer’s liability insurance at any price, at least in part because of the likelihood of compensation claims against them. “A number of firms can’t join the FMB because they don’t have insurance,” he says.

The ABI takes a robust line on this question. It argues that the higher premiums are, to some extent, small contractors’ own fault. “Traditionally, construction, particularly the smaller contractors, have been vulnerable to claims,” says an ABI spokesperson. “Lots of construction is high-risk and perhaps the small firms are not as aware of safety as we would have liked.”

The small contractors respond that claimants are often exploiting the way insurers handle claims. One subcontractor gives the example of a worker who pricked his finger putting a tack into a board. The man did not go to hospital, but a couple of days later complained of a sore finger. A fairly innocuous injury, you may think, but the claimant received about £1500 as a result. The subcontractor says it is often a “straightforward economic reality” that it is cheaper to pay off small claims, as conceding liability on 20 small claims may be cheaper than paying compensation plus legal costs on one big one. And, of course, the bill for those 20 claims is eventually referred to the subcontractors.

The perceived ease of winning a claim has angered the industry. One leading contractor says that five years ago it was receiving seven or eight claims a year, but this had risen to 40 at the last count. This despite greatly improved safety awareness and training, and more effective risk assessments. Another says that in the mid-1990s he would have been surprised to have come across any claims at all; now between five and 10 come across his desk a year. Stephen Harvey, company secretary at specialist contractor John Doyle, puts the case bluntly. He says: “In years gone by I would say that three-quarters of claims had a genuine basis to them. In recent years the figure that has a genuine basis is probably less than half.”

Many contractors argue that the appearance of legal firms dedicated to offering no-win-no-fee cases for anyone who has suffered an accident in the past three years has prompted a rise in claims.

In fact, Garvis Snook, chief executive of Exeter-based contractor ROK, thinks the ambulance-chasing lawyers are more culpable than opportunistic workers for the increase. “It has been driven more by the legal profession than the workforce,” he says.

The rise of no-win-no-fee cases and the robustness of lawyers’ newspaper, television and radio advertising has encouraged workers to think seriously about making claims. Executives argue that the lawyers have targeted the construction industry’s workforce, and that that workforce has become increasingly litigious.

Ever the villain, the legal profession makes a strong defence of its culture. Sam Harmell, a lawyer at Manchester-based firm Fentons, is representing two engineers who are considering suing Balfour Beatty for psychological injury after they were nearly hit by a falling crane at a site near Clapham Junction, south London. He says that in the past workers were often unable to get a fair recompense after being injured as a result of their employers’ negligence. “The no-win-no-fee culture emanates from principles of access to justice as most people are unable to pay legal fees. It offers the ability to seek redress,” he says.

The lawyer might be right – the contractors themselves may be the problem. Many claims for compensation are what can be described as “legacy issues”. One company secretary who has looked at claimants’ records says many of the incidents causing harm occurred as far back as the 1950s or 1960s. These can include asbestosis, vibration white finger – a condition caused by working with vibrating machinery – or blood poisoning caused by working with red lead.

Some contractors fear that they are being found liable for illness or injury that happened to workers long before they worked for them. The companies are trying to combat this problem. Galliford Try introduced a health screening programme for new recruits two years ago and has set up annual health checks in business units where people are considered to be at greatest risk.

Paul Pedley, chief executive of housebuilder Redrow, has set up a health questionnaire through an independent company to get background health information. Pedley says: “Everyone on our books has to go through a health and safety screening. It puts the onus on the employees to be very honest and open. There is a risk that someone could say that something went wrong with them when it actually happened before they joined.”

Perhaps the worst news for contractors in all of this is that the lawyers are expecting claims from the construction sector to grow in the future. About 5% of lawyer Harmell’s workload consists of cases drawn from the construction sector; he argues that the figure would be higher if it were not for the bravado of the industry’s workers: “People in the construction industry are probably more reluctant to put in claims. There are regular breaches of Health and Safety Executive rules, but people seem willing to accept the risks, so they are not claiming.”

Harmell adds that workers often do not claim because they do not necessarily understand that the duty of care in an accident rests with the company rather than individuals – in other words, they are reluctant to come forward because they think that they will be blaming their mates for making a mistake.

Harmell concedes that some workers do make dodgy claims. However, he points out that each case is referred to medical experts, who have a duty to the court as to whether to proceed with the case. Harmell says his company wins most of its construction cases because it does not proceed with optimistic claims.

Most contractors seem unconvinced by this. They believe that a labour force that once took injury and illness for granted is now cynically claiming compensation at a time when health and safety standards are arguably at an all-time high. As they see it, the Welsh labourer of more than 20 years ago nursing his injured back would have been laughed at by his on-site colleagues, but today would be applauded for trying to get one over on his employers. How times have changed.