If it’s not broken – don’t fix it

As I approach the twilight years of my career within this profession (started in January 1970 at Lincolns Inn, London) I have become saddened and extremely concerned at the utter mess that the personal injury system now finds itself in mainly in terms of funding and dealing with the best interest of Claimants.

In my last article I suggested that road traffic insurers were perhaps the authors of their own misfortune: - if the cap fits wear it, and from what has been happening of late perhaps it fits some regulatory bodies as well.

In the legal, insurance and general press there has been much said in the past few months, indeed years, about the topic generally described as third party capture.  Third party capture seems to have a two pronged approach:-

  1. Insurers attempting to settle claims with the victims direct prior to them obtaining legal advice and in some cases advising Claimants that they do not need independent legal advice and
  2. Restrictions of freedom of choice under many BTE/LEI products, such that Claimant's are told that if they do not use a "Panel" solicitor their costs may not be recoverable....and other tactics of which we are aware    

The Government in its infinite wisdom decided in the 80’s/90’s that public funding for personal injury Claimants/litigation should be withdrawn.  I mentioned on the APIL website recently that it was the least expensive of all public funding work to which someone validly replied “the thinking behind the Government at the time of scrapping public funding was ‘if you are not spending it then clearly you don’t need it’”.

The point that the government missed was that the majority of public funding certificates were used as funding vehicles and in most cases certificates were discharged at the end of the litigation/claim with a ‘no claim for costs on fund’ report being submitted to the Legal Services Commission.

The scrapping of public funding and the withdrawal of it in its entirety (even for purposes of disbursement funding) was and is, in my view, the most causative factor to the complete and utter mess that we find ourselves in now.

Once public funding was withdrawn access to justice and a level playing field still had to be maintained so rather than ditch the indemnity principal or bring in alternative funding agreements the Law Society and others introduced the concept of Conditional Fee Agreements, all known and loved as ‘no win no fee’.  This became the insurance industry’s one big chance to challenge such funded cases when it came to challenge success fees and valid retainers, and indeed the reality of whether the indemnity principal had been offended (Callery v Gray).  If a Conditional Fee Agreement was not enforceable against the Claimant then it could not be enforceable against the third party insurers/Defendant.  At the time there was a lot of discussion as to scrapping the indemnity principal but seemingly that would have been too simple.

Satellite litigation ensued, still does and for ever more will do on these issues and you only have to read the many articles by Helen Blundell, John McQuater and many others in Personal Injury Focus and the other legal press to be aware of this, to say nothing of the irritating challenges we ourselves come across everyday by those Defendant cost muppets.

Once Conditional Fee Agreements and the concept of them settled down the insurance industry faced with significant success fees and what it wrongly perceived as the ‘compensation culture’ had to police what they again wrongly perceived as escalating claims, and came up with the idea of providing BTE/LEI within its own products to its consumers and moreover to its consumers victims.

And what did our regulators do?  As if having public funding removed was not bad enough we then as a profession scrapped at a stroke the general ban for payment of referral fees.  The up shot of which has simply been that many law firms have been buying the claims from the BTE providers and at such a rate that the best interest of the Claimant must be brought into disrepute (up to £850.00 referral fee being paid for predictable cost claims) leaving very little funds to properly address and ensure the best interest of the Claimant in a claim of that type (and purchased at that price) prevails.

I will not go into the politics of the rights or wrongs of third party capture in this article as this debate has been addressed for so long and seemingly there are no signs of the problems being resolved, the point that I am trying to make is that for both sides of the personal injury industry, public funding was the least controversial and most accepted format whereby the insurance industry were protected by the conditions imposed on us as Claimant lawyers that we could not sign a Claimant to a Public Funding Certificate unless we would be advising that Claimant to use their own money if they had it (merits all encompassing) and we were protected in terms of funding so that the now never ending cost satellite litigation did not at that time occur.

The other problem the industry now faces, as a result of the referral fee, (Claimant lawyers, insurers and Defendant lawyers) is that Joe Public perceives that it is a Claimant Management Company that they should first go to when and if an accident befalls them and not direct to a solicitor as was the case in the good old days of public funding, such that the Claimant Management companies themselves have added to the cost and expense to all parties in the industry.  Most of these referral fees are disproportionate and are not in the best interest of the Claimant or the industry, as any referral fee will add somewhere to the cost of the claim or impact on the claim’s efficiency and expertise.

We managed for years in the absence of CMC’s and can do so again if it were not for the complications that CMC’s have created and also if BTE providers permitted policy holders to choose a solicitor of their choice.

My point is that history shows that the old systems of funding were not broken which begs the question why did we try to……..

Robert Webb, HSR Law, an APIL Fellow and membership chairman of ACSG www.acsg.org.uk