Britain is gripped by a "culture of fear" of legal action, the lord chancellor said as he set out plans to end the so-called compensation culture.
A teaching union advised its members not to lead school trips
He said beneficial activities like school trips were often being prevented by a fear of spurious claims.
Outlining a new Compensation Bill Lord Falconer pledged to "put the brakes on the cowboy claims companies who take advantage of the public".
Measures include regulating claims firms and limiting hard-sell tactics.
"Local authorities don't open public spaces because they fear they might be sued, people don't do school trips because they fear they might be sued or sign up for voluntary organisations, like the Boy Scouts or Girl Guides," he said.
He said this was a result of the damaging compensation culture.
"Is there a culture of fear about being sued? Yes there is. So examples of good worthwhile voluntary and public service activities don't take place because of that fear," he added.
Announcing the measures, Lord Falconer said: "Not every incident that results in injury or loss will give rise to a claim for compensation.
"Individuals and organisations that adopt reasonable standards and procedures will not be liable and should not have to face unfounded claims."
The bill will also highlight existing advice over activities such as school trips, to try to reduce organisers' fears of being sued in the event of a mishap.
Courts will also be instructed to consider the wider value of such activities when considering claims.
The Compensation Bill gives Lord Falconer the power to designate a body to regulate the industry - although the specific organisation has yet to be decided.
But he hinted that the Claims Standards Council, set up as a voluntary membership organisation for the industry last year, may become responsible for compulsory regulation.
The regulatory body will have to ensure that claims firms are fit and competent to practice and that they act in the best interests of the client.
Under the bill, anyone providing unauthorised claims management services will be committing an offence and could get up to two years' imprisonment.
Those providing claims management services will be required to give consumers clear advice about the validity of their claim, options for funding the costs and to provide a complaints mechanism if things go wrong.
The bill was welcomed by the chairman of the Bar Council, Guy Mansfield QC, who said: "We support the moves to regulate claims farmers, who have caused widespread public concern about ambulance-chasing and the generation of frivolous or vexatious claims."
But a spokesman for personal injury firm, Thompsons, said the government had fallen into a trap created by the insurance industry.
These measures were being produced as a result of a "phoney war over a compensation culture that doesn't not exist".
In fact, the number of personal injury claims had dropped, the spokesman said.
Spokesman for the Association of British Insurers Nick Starling said it backed the bill, but added that it should be "the first step on the road to reform of the personal injury compensation system".
"We are calling on the government to bring forward radical reforms to speed up and simplify the process for claimants, put rehabilitation at the heart of the system and tackle the disproportionate costs in the compensation process," he added.
An increase in litigation has arisen partly from the introduction of "no win, no fee" legal work in the late 1990s and the birth of claims management firms.
Have you or your family been prevented from going on an activity because of fears about legal action? Send us your thoughts on the plans to tackle the so-called compensation culture.
For over 10 years, our village school organised a fund raising walk in the Black Mountains. We were well organised and had no incidents or problems. Then our insurer simply refused to insure us again, even though we provided them with full details of how we operated the walk. We no longer run the event and hundreds of people have been denied the opportunity to take exercise in the outdoors. Our society has become severely risk averse and this will contribute to lack of fitness, obesity and poor health.
Sid, Crickhowell, Powys, Wales
I am part of an organisation that yearly runs a camp to do service work on Scout and Guide campsites. Because of a clash of school holidays I organised a small camp in Scotland, but found the insurance would not cover the camp. I went ahead anyway, and the campsite were very grateful, but I did not like the feeling of knowing that I was personally liable if anything went wrong and could potentially have lost my home if anything went wrong - I doubt I'll be organising anything similar in the future. As for the main camp, although there has been no serious accident in nearly 40 years, sooner or later someone is going to slip or fall and I've no doubt the cost of insurance will force us to stop this service work!
Mike Haseler, Glasgow
I stood and watched a sorry excuse for a children's carnival in the summer in my home town - when I asked why was the effort so poor I was told no one wants to get involved the risk is too great and the insurance requirements and cost are just too high - I had to conclude that this compensation culture is destroying our communities!
Graham, Sussex, England
I am a solicitor specialising in personal injury claims. People have talked a lot of rubbish about being scared to do various outdoor activities in case someone gets sued because someone else got injured whilst in their care. Frankly whilst working on a no win no fee agreement unless I know that I have a winnable case then I am not going to take it on. What that means is that unless the person who should have taken care of the injured claimant didn't use their common sense to prevent any avoidable risks from happening then they should become responsible for payment of damages to the injured party.
If you got injured because it was someone else's fault and because of your injuries you lost your job, built up debts and lost the roof over your head and consequently your family because of the stress involved shouldn't you be entitled to sue the person who put you in that position? Why is it also that insurance companies who complain so much about a litigious society are also the same financial backers of these claims farmers with their legal expense insurance and thus benefiting from the litigious society? If you want an independent view on claims farmers and the compensation culture then contact the Association of Personal Injury Lawyers.
Edward Lewis, Bexleyheath, UK
Our voluntary work has had to be limited because of the fear of litigation - for example, can't take an old person out if they use a Zimmer frame 'in case they fall over'. Common sense no longer prevails.
I used to do voluntary work for a national youth organisation. That organisation was alive with what I would describe as institutionalised paranoia! Even so much as a game of rounders had to be overseen by a qualified person, eg a sports coach or outdoor activities qualified person. Even the playing field had to have a risk assessment on paper first! I gave up!
Myself my wife and children enjoy pony trekking, however it's getting harder and harder to find stables that still do this. Many have been forced out of business by the rising cost of public liability insurance and the stress involved in dealing with spurious claims. Did you know that the last pony trekking centre in the Forest of Dean closed earlier this year! It should be a Mecca for this type of activity and an important part of the local rural economy but now it's gone. Without proper schools to teach people they are trying to teach them selves, this is resulting in real accidents. The no win no fee brigades are actually making the situation worse not better and the sooner they go the better.
Paul Denney, Dursley, Gloucestershire
I work at a ski slope in North Wales, as a trainee instructor. I was shocked to hear that it is quite often that instructors are sued for 'negligence'. These people are made fully aware that skiing is a dangerous sport, and yet when they fall over and sprain their wrist, or break an arm, they instantly jump to the courts. The situation is exacerbated by the fact that we cannot teach them how to fall properly - if they try, and do it incorrectly, it's our fault, and we get sued. Thankfully, we fight every case, at huge cost to the company, and no one has yet proven we are negligent. Hurrah!
Anon, North Wales
I used to be involved in teaching Judo to children but insurance became difficult and we had to stop. I think this is bad law. I would be better to make a provision that people are required to exercise reasonable personal care and responsibility for their actions. It is in the nature of fire to burn.
Keith, Rayleigh, England
The BBC may edit your comments and not all emails will be published. Your comments may be published on any BBC media worldwide.