INTRODUCTION

In the UK, as in perhaps all mature legal systems, compensation for victims of misfortune comes from a number of diff erent sources. Th e following may be regarded as the most important:

• – Social security

• – Private insurance

• – Tort law

• – A surprisingly wide variety of other compensation funds and schemes

The last-mentioned – the focus of this chapter – are created because of perceived gaps of cover in, or shortfalls in the compensation offered by, the other three sources. Each of the three suffers from its own specific limitations – affecting either the scope of cover provided or the amount of compensation paid.

Social security provides only a minimum level of support and compensation payments are targeted on needs, rather than losses. In general, only pecuniary rather than non-pecuniary needs are addressed. The benefits provided may be means tested.

The major limitation of private insurance, by contrast, is that it is voluntary, so the coverage it provides is incomplete. (In some contexts – for example, in respect of motor vehicles – third-party liability insurance is compulsory, but this is to ensure the effectiveness of the remedies granted by tort law, so the insurance here is not an independent source of compensation.) In practice, there are limits on what first-party (or loss) insurance will cover, especially because of the moral hazard problems that arise if insurance benefits are too attractive. For example, the benefits payable under income protection insurance in the event of unfitness to work will not replace the insured's full lost income for the remaining part of his or her working life but will likely be limited to a specified percentage of pre-disability earnings.

In considering the scope of the compensation provided in the UK by the law of tort, it should be noted in the first place that the system is predominantly fault-based. In comparison with other European countries, there is very little strict liability. Fault-based liability applies even in respect of road traffic accidents. In respect of work-related injuries and illnesses, there is no workers‘ compensation. The erstwhile system was abolished in 1948 on the theory that occupational injuries and illnesses should not be distinguished categorically from those arising in other contexts; instead, all should be brought within a universal social security system.