For the first time since the controversial conditional fee agreements (CFAs) were introduced three years ago, however, there appears to be some progress – both from the courts and the government – in making the system work. But the dispute has dragged both insurers and personal injury lawyers through the mud.
When the government ended legal aid for accident claims, it had no idea the simple-sounding replacement would provoke such a bitter battle.
The idea is that an accident victim instructs a solicitor on a “no win, no fee” basis to sue, say, the driver who knocked him down. If the claim fails, the accident victim is liable for the defendant’s costs and must take out “after the event” insurance to cover these.
Most traffic accident or “slips and trips” cases are settled. Claimants pocket the damages while the solicitor taps the defendant’s insurer for costs. These are charged at the standard rates plus a percentage “uplift” success fee, as well as the insurance premium.
But with no guidelines on costs – the Court of Appeal seemed to suggest 20 per cent success fees in straightforward cases a few years ago – insurers have systematically challenged most aspects of CFAs, delaying thousands of payments.
“There are solicitor firms up and down the country facing hardship because insurers don’t like the CFA regulations,” says Anthony Dennison at Manchester’s Rowe Cohen. “Solicitors and claimants have been wrongfully deprived of about £1bn.”
Not surprisingly then, personal injury lawyers seized on a Court of Appeal ruling last week. Insurers had challenged the legality of CFAs provided through The Accident Group (TAG), the largest of the so-called “compensation specialists”, which accounts for about 20 per cent of the market.
But insurers questioned whether TAG’s sales practices – and the fact that its own employees explain elements of its CFA contracts to claimants, rather than solicitors – were legitimate. The Court of Appeal had strong words on that score. Parliament’s aim was “to enhance access to justice, not impede it”, said Lord Justice Brooke. He suggested judges should be “watchful” for similar technical challenges. Personal injury firms hope this could loosen the insurers’ purse strings. They may be disappointed.