Prospective personal injury reregulation would upset lawyers, benefit litigants

February 20, 2010 at 20:01 1 comment

Two developments in the last month heralded a reassertion of consumer rights in the large and fast-growing personal injury sector.

The seriousness of the situation has inspired a British equivalent of the American term ‘ambulance chasing’: ‘claims farming’.

Even five years ago, The Times reported that Lord Falconer had blamed the sector for ‘creating a compensation culture that has led to children having to wear goggles while playing conkers’.

For an idea of the size of the industry, one statistic will suffice: there were ‘625,000 new [motor bodily injury] claims registered in 2008–09, which represents a 13% year-on-year rise’, according to Datamonitor, a business information firm.

‘No win, no fee’ has been a popular tagline, even while it misrepresents the obligations which contracts with personal injury lawyers tend to put upon claimants.

And when damages are won, ‘The legal costs of a claim have sometimes been 10 times as much as the cheque finally received by the injured party’, wrote the Guardian’s Marcel Berlins.

Indeed, in the view of Simon Douglas, director of AA Insurance, lawyers’ practices are not only a bane on those involved in litigation – either beaten defendants, or those claimaints who are unsuccessful. A rise in claims encouraged by prolific marketing is pushing up the cost of motor insurance cover for all drivers, he explained.

A less familiar practice that has disadvantaged the consumer is the auctioning of injured policyholders’ names to solicitors. By this means, insurers have earned ‘referral fees’ as high as £10 000.

But in the first week of January, the new Solicitors Regulation Authority criticised this practice, arguing that it tarnished the profession; the authority indicated that it would review practitioners’ compliance with its regulations, and in the absence of good behaviour would consider a ban.

This promise went hand in hand with a farther-reaching review of the costs to clients of personal injury claims, published later in the month. Lord Justice Jackson’s extensive Review of Civil Litigation Costs took a year to complete, and caused significant anxiety to the industry it was asked to scrutinise.

The report, like the relevant law, is complicated and technical. And because it was not commissioned by the Ministry of Justice itself, but by Lord Clarke when he was Master of the Rolls, it is not necessary for the government to act on its recommendations now. Lacking that political cooperation, one avenue of reform for a concerned judiciary would be to work with the rules as they now exist. ‘A cultural shift, rather than new rules, is what is needed’, Times journalist Neil Rose maintained, before the report was released.

Justice Jackson’s headline conclusion was that ‘costs are disproportionate and impede access to justice’. Among his recommendations were genuine ‘no win, no fee’ arrangements, or contingency fees, which are achieved by mandating that lawyers are remunerated from a legally capped percentage of damages won, rather than the ‘after-the-event’ insurance that leaves litigants unexpectedly indebted. He urged, as well, reforms that would shift the cost of success from the defendant to the injured client, but also raise the maximum level of damages by 10% to make that affordable. He joined the SRA in advocating an end to referral fees.

‘The focus of our litigation process should be on compensating victims, not upon making payments to intermediaries’, Justice Jackson said. Trade union firm Thompsons estimates that with his regulations in place successful lawyers would take ‘up to 50% of an injured person’s compensation’.

The recommendations may not sound momentous, but according to Marcel Berlins ‘their cumulative effect will be radical’. Interviewed by Legal Week, Peter Clough of Osborne Clarke used the same language: ‘This is pretty radical’, were his words.

From the press conference at which Justice Jackson introduced his report, Marcel Berlins concluded that the judge’s ‘attitude to the fact that, under his proposals, lawyers would undoubtedly lose income was simple: “Tough.”’ Certainly, many lawyers quoted in the Law Society Gazette’s article on the report were dissatisfied with it: the headline portrays it as sending ‘shockwaves through the industry’. But perhaps they should not worry, if, as Ross Clark declared in 2005, ‘Claims-farmers are not really lawyers at all, but loan sharks who have come up with an ingenious way of saddling people with debt.’

This article lacks some links as of its posting


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