A top Irish businessman warns Irelandcould lose ad many as 20,000 jobs in the next year as businesses are forced to close due to the high number of excessive payouts by insurance companies over dubious personal injury claims.

Pat McDonagh, the founder and owner of Supermac's, an Irish fast food franchise, blasted Ireland's “compo [compensation] culture” whereby many people file questionable personal injury claims against companies and businesses.

“Unless action is taken immediately, there will be 15,000 to 20,000 jobs lost in the next 12 months,” he said over the weekend. “A lot of businesses right across the board are on the edge. It’s gone out of control.”

Supermac’s itself is facing dozens of personal injury claims from its Irish outlets.

McDonagh also blamed the legal industry in Ireland for facilitating many questionable and even bogus cases that often generate large payouts by insurance firms.

“It’s not just the fraudulent claims we have to look at – it’s who is making money from them. The legal profession [is] promoting all of this,” he said. “The problem is, there is no penalty or no accountability toward the claimant or none on the solicitor and that needs to change. I want to see those who try to sue me wrongfully exposed as they have to pay the price for their behavior. It’s scary what’s happening.”

Colin Tobin, a businessman in Cork who owns pubs, is also fed up with bogus claimants.

“I want to blow the whistle on doctors for the part they are playing in it also, along with the insurance companies and solicitors,” he said. “When anyone sends a solicitor’s letter to the pub I have to pay [$2764] in excess pay even though they haven’t checked to see if it’s fraudulent or not. If I get four solicitors letters a year, I have to pay [$11,056] to the insurance company on top of my premium, which is another [$11,056]. I am present in all of my businesses 24/7. There is absolutely no negligence.”

A recent government inquiry revealed the average payout for soft-tissue injuries [damage to muscles, ligaments and tendons] in Ireland came to just under $22,110, four times the average payout in neighboring Britain.

In 2017, Ireland’s high court issued 350 personal injury awards totaling $104 million. Of those payouts, 53 were for more than $553,000 each.

In 2018, the highest single payout was for more than $1 million in an employer liability case.

Small businesses, especially those that cater to children, are particularly vulnerable.

Gerry Frawley, founder of the Irish Inflatable Hirers Federation, which represents the bouncy-castle industry -- that is, companies that operate inflatable structures popular with children in amusement parks, schools, church functions and other events – said these firms are facing doom due to lack of underwriters willing to insure their businesses.

“The responsible people will go out of business in the next year,” he warned. “And the cowboys who never cared about safety or insurance or checks or registration will be renting play equipment to your children.”

John Caulwell, who owns a Spar retail food shop in Dublin, said after someone slipped on the street outside his store five years ago, his insurance costs began to mount.

“The insurance company settled it without discussing it with me,” he said. Subsequently, Caulwell’s premium immediately jumped to $13,265, from $4,421.

After two more similar incidents, his premium spiraled to $45,324.

“It came very close to closing me down. If there is another alleged incident and the premium goes up further, it will put my business in serious jeopardy. There is so much that is wrong with the system,” Caulwell said.

The soaring insurance premiums have led to many public institutions and civic organizations to shut down certain activities.

“Sports clubs and community groups aren’t able to offer the same services they used to,” said Peter Boland, director of the Alliance for Insurance Reform, a coalition of businesses, sporting bodies and nongovernmental organizations. “We have a crisis of childhood obesity, but many primary schools don’t let children run in the playground anymore, or play football informally, because they’re afraid of injury claims.”

Minister of State at the Department of Finance Michael D’Arcy is seeking to clamp down on rising insurance costs, planning to form a judicial council that will create new guidelines for damages awards, gradually to push such payouts down and to level off premiums.

“We would like to see the level of awards being recalibrated down to the levels of our nearest neighbors [England and Wales],” D’Arcy told the Irish Times. “If that doesn’t happen, then I believe action will have to be taken by the Oireachtas [the legislature]. The Oireachtas is not prepared to sit by and see these levels of awards continue costing jobs and businesses.”

A bill in the legislature endorsed by Sen. Tony Lawlor would cap personal injury awards as a way to reduce premium levels for motorists, businesses and farmers.

Last week, the Retail Grocery Dairy & Allied Trades Association, which represents independent retailers, stated emergency measures were required “to prevent further business closures due to high insurance costs.” The association asked the government to impose a super tax on insurance companies’ profits if premiums don’t fall soon.

Earlier this year a parliamentary committee revealed the insurance companies, while claiming that 20% of all claims are fraudulent, had only referred 19 cases to police in a recent six-month period.

Lawyers said Ireland’s insurance companies are earning profits in excess of the premium payouts they distribute.

Ken Murphy, director-general of the Law Society of Ireland, the professional body for solicitors, said reducing payments to claimants would “take from the pockets of injured victims of negligence in order to line the pockets of an increasingly profitable insurance industry.”

Stuart Gilhooly, a personal injuries lawyer and former president of the Law Society, insisted: “The vast majority of people who bring claims are genuine. It is the odd few who make it unsavory for everyone else.”

Gilhooly further said the insurance industry is exaggerating reports of bogus high payouts in an effort to lower compensation claims and uplift their own finances.

“They [insurers] have very carefully ensured that any claim they see as being fraudulent or where the payout appears too high is emphasized in the media; they have used this as an excuse for why premiums are so high, but that isn’t borne out in reality,” he said.

RELATED STORIES