Each month, we hear of more ludicrous compensation claims, leading to the belief that Britian is in the grip of a damaging compensation culture. The president of the Association of Personal Injury Lawyers says there is no such thing - but small businesses in the North-East disagree. Business Editor Julia Breen reports.

A CHEF cuts his finger chopping avocados. Does he bandage his finger and put it down to bad luck? No, he sues his employers.

A convict claims compensation from his captors because he is not given nail clippers, and in schools around the country, children have been banned from playing conkers.

Not only are teachers and doctors working daily in the shadow of lawsuits, but the rocketing cost of insurance is eating into businesses' profits - even ruining some.

Last week, the Lord Chancellor blamed lawyers and their encouragement of frivolous court cases for the view that Britain is caught in an epidemic of litigation.

Ambulance-chasing, no-win, no-fee firms that dangle the possibility of cash windfalls in front of the victims of accidents are fuelling the compensation culture, he said.

But only days later, while visiting the North-East, Colin Ettinger, the president of the Association of Personal Injury Lawyers (APIL), said there was no such thing as a compensation culture, provoking an angry reaction from businesses who have seen their insurance premiums leap in recent years.

Addressing the North-East APIL dinner, Mr Ettinger said that figures showed there were 9.5 per cent fewer claims this year than last.

Mr Ettinger, a partner in law firm Irwin Mitchell, which has offices in Newcastle, said: "There is no such thing as a compensation culture. It is something that has been blown out of proportion.

"We hear about the extreme cases, the compensation claims that really are ridiculous. It is because of this there is a myth that we are living in a compensation culture.

"No one has actually looked properly to see if the compensation culture really exists. Anyone that has looked into it has come to the conclusion that there isn't one.

"I know I am a lawyer and I might say this, but people from the insurance industry I came across recently also believed there wasn't a compensation culture.

"Also, the figures show that the number of claims is actually going down.

"Whenever there is a claim, the compensation recovery unit, based in Newcastle, put together figures and they show in the past 12 months the number of claims has gone down.

"People are simply not getting the huge compensation payouts for things like slips and trips that certain sectors of society would have us believe.

"The truth of the matter is that only meritorious claims for compensation will succeed and spurious ones will not."

But Mr Ettinger's view was greeted with disdain by the region's small businesses last night.

The Federation of Small Businesses (FSB) welcomed Lord Falconer's outspoken determination to halt the growth of a compensation culture. The FSB has been lobbying the Government since last year about the tactics used by claims management companies to canvass for business.

Peter Troy, Darlington branch chairman of the FSB, said: "You bang your head on a piece of wood now and you think, 'who put that there? I'm going to sue someone', whereas ten years ago you would have just said 'ow' and gone about your daily business.

"There is a compensation culture, of course there is.

"We have been talking to the Lord Chancellor and the insurance industry about this issue because it is hugely damaging for small businesses.

"People trip over a step in a shop and immediately will sue the shopowner. Insurance companies have to cover these costs, and the risk is getting greater and greater."

Mr Troy said the compensation culture had caused insurance premiums to rise in the past few years, putting a massive strain on small businesses and sole traders. But he said the £50bn cost to the insurance industry of the 9/11 attacks on the US also pushed up premiums.

He said: "Small businesses' insurance premiums have risen from hundreds of pounds to thousands of pounds.

"Some businesses are unable to get insurance because the risk is too great, particularly those who work outdoors, because there is a greater risk to themselves and to the public.

"Scaffolding erectors find it almost impossible, as do coach operators, because of the risk of a coach crash when 30 people would make a claim.

"There are only about two companies in the whole of the UK that will provide insurance to coach operators.

"There is also the fact that insurance companies are taking longer and longer to process insurance claims, which is a very serious issue for small businesses."

Despite these claims, Mr Ettinger still believes that not enough deserving people are claiming compensation when they are injured on the roads or at work.

He said that a lot of television adverts were "distasteful", and were having the opposite effect by discouraging people from pursuing claims.

"The adverts you see give the impression of ambulance chasing and it is a turn-off for people," he said. "It gives the impression that you can put a claim in and get a cash windfall for your injuries.

"But what people don't realise is that if you are injured and it is someone else's fault, you actually deserve compensation to make up for your injuries.

"And it is actually a lengthy, difficult process to claim compensation. It isn't as easy as it should be and most of the frivolous claims are thrown straight out of court.

"I read about a claim recently where a woman went shopping in the Trafford Centre in Manchester and got swollen ankles as a result, and she made a claim.

"The problem is that the media and other people latch on to those and they tend to get treated as the norm, when in fact they are very much the exception to the rule."