Compensation Culture: Analysis of Claims and Legal Disputes

This essay provides an overview of compensation culture, examining its impact on businesses and the legal system. It explores the rise of claims, particularly in the UK and USA, and the effects of litigation aversion on firms. The essay discusses the famous Liebeck v. McDonald's Restaurants case as a key example of compensation culture and its influence on public perception. It highlights the balance between customer safety and the potential risks faced by businesses, concluding that while compensation offers some protection to customers, it also creates challenges for companies. The essay references various legal and social impacts of compensation culture, providing a detailed analysis of its effects on both businesses and the broader legal landscape.

Law
1

Table of Contents
Compensation culture.................................................................................................................3
Conclusion..................................................................................................................................4
List of references........................................................................................................................5
2

Compensation culture
Compensation culture is a culture in which people seek compensation for relatively
minor events and prepared for demanding their compensation. Compensation culture has
been gaining momentum in the Britain and America litigiousness1. Compensation culture is
applied to number of claims such as employment and human rights, personal injury etc. In
UK there is too much claim and blame taken into account in the legal and social system in
UK than USA. Complains in America are more stereotypes. Family law disputes and any
commercial activities risk have more fees in UK.
The compensation law allows Consumer to sue Companies for any damage such as
defect or faulty products and in return firm pays compensation for such damages in the form
of money or kind. The merchant has to adopt the local national culture for measuring the
compensation and their effects.
One of the new stories of USA tort reforms under which the limit of damages were
addressed on number of frivolous law suit awarding people in case of personal injury which
is irrespective of the severity of injury. Compensation culture is pushing the cost of insurance
and also fees of litigation. Firms are having a fear of litigation which is more than the actual
demand of compensation by the customers. The compensation culture has become more a
playground games and extracurricular activities for any firm as it is leading to the great
effects on the need of litigation aversion. There is decline of ethos of care in case of public
sector and are now directly and indirectly linked with the concern of litigation. This is
affecting the normal functioning of the business of any firm and also impacting the merchant
negatively. The claim for compensation in tort is making each year around one from every
60 in UK. Number of claims is exceeding one million which is including further about half of
the accidents.
One of the cases of Liebeck V. McDonald restaurants is the popular case of
compensation culture under which the lawsuit of hot coffee became a flashpoint of debate in
tort of United States2. In this case New Mexico civil jury awarded around 2.7 million to
plaintiff Stella Liebeck which of 79 year old women who suffered third degrees burn in
pelvic region which was occurred after the purchase of spilled hot coffee from Mc-Donald
1 Hand, J., 2010. The compensation culture: Cliché or cause for concern? Journal of
Law and Society, 37(4), pp.569-591.
3

restaurant3. The women were admitted to hospital for eight days which was followed by 2
years treatment of medical. Therefore, firms have now an exaggerated fear of getting sued
which is actually risk averse and cautious in their behaviour.
Conclusion
Compensation culture is although providing safety to the customers to some extent
but creating a great risk for firm to get ready for litigation in case if they are not able to
compensate the customers properly.
Hence, from the above it can be sum up that compensation is discouraging people to
pursue legitimate claim is a cliché and need to be dissolved. But if it not so, then it is not the
genuine reason for concern for the society.
2 Forell, C., 2011. McTorts: The Social and Legal Impact of McDonald's Role in Tort
Suits. Loy. Consumer L. Rev., 24, p.105.
3 Morris, A., 2011. 'Common Sense Common Safety': the compensation culture
perspective. Journal of Professional Negligence, 27(2), pp.82-96.
4

List of references
Forell, C., 2011. McTorts: The Social and Legal Impact of McDonald's Role in Tort
Suits. Loy. Consumer L. Rev., 24, p.105.
Hand, J., 2010. The compensation culture: Cliché or cause for concern? Journal of Law and
Society, 37(4), pp.569-591.
Morris, A., 2011. 'Common Sense Common Safety': the compensation culture
perspective. Journal of Professional Negligence, 27(2), pp.82-96.
5