Personal injury claims portal: friend or foe?

The personal injury claims portal opened for business on 30 April 2010. The business in question was road traffic accidents (RTAs) with a value of general damages likely to be between £1,000 and £10,000.

On 30 July 2013 the portal was extended both vertically and horizontally. Vertically to include RTAs up to a potential general damages value of £25,000 and horizontally to include employers’ liability (EL), occupiers’ liability (OL), public liability (PL) and disease claims.

The trigger date for the horizontal expansion was the date of accident, or date of protocol letter for disease claims. For RTAs, anything submitted after the 30 July fell into the new regime (no matter if the accident was before the expansion).

Unintended consequences

Preceding the extension, there was also the passing of the Legal Aid Sentencing and Punishment of Offenders Act (LASPO), which banned referral fees and implemented the Jackson proposals, the slashing of the fixed fees, and the implementation of fixed fees outside of the portal for matters with general damages up to £25,000. Combined, the changes are a huge amount for solicitors, clients and insurers to take in.

The effects of LASPO have been far reaching; claimant solicitors have had to rethink their business models and come up with LASPO-compliant ways of getting new clients. This has led to far more firms looking to self-advertise and there have been unintended consequences, such as the rise of solicitors offering inducements to clients to come direct to them.

As for claimants, they have benefited from the ten per cent increase in general damages and the publication of a new set of Judicial Studies Board guidelines, so there does appear to be upward pressure on the value of general damages.

However, this has been more than countered by the conditional fee agreement (CFA) uplift and the cost of any applicable after-the-event (ATE) insurance premium now being borne by the client.

The claimant also has the benefit of qualified one-way costs shifting (QOCS), but the law is in its infancy on this point, so time will tell as to how much of a benefit QOCS actually is.

There was an understandable surge in RTA submissions to the portal before the change in fees and legislation in April 2013 and thereafter there was a slump. But RTA portal numbers still remain solid, and even EL and PL numbers are growing, so there is no sense that the changes have put an end to claims.

Changing mindset

So what has all of this change done to claimants, defendants and their lawyers? A claimant no longer expects 100 per cent recompense, but that change in mindset does not seem to have had much impact: innocent claimants are still being injured and rightfully wanting to claim.

What they might find, though, is their choice
of solicitors is being severely curtailed. The confluence of reduced fees, large entrants to
the market, the change in lending patterns of banks and the rising professional indemnity insurance premiums have had a massive effect on the personal injury solicitors and for some it has been catastrophic.

Administrations, interventions, firms running out of cash and firms being unable to get professional indemnity insurance are becoming commonplace. Last year, around 150 firms could not get professional indemnity insurance and the rumours are that this year it will be nearer 500.

You also have well-backed insurers, venture capital and stock-market listed organisations entering the personal injury space. Last year it
was said that you had to get big, get niche or get out, and certainly the big are getting bigger and plenty are getting out; not all of which is by their own choice.

Lawyers are having to reinvent themselves
and all previous statistics and management information has become near useless as the old model just does not work anymore. We took the step of releasing an online profitability calculator for PI firms when we realised how broken the model can actually be (see, www.bottonline.co.uk/profitability-calculator).

Some firms believe everything is alright, but
they are living on the profit of old-world work in progress and once that is gone, what are they left with? Unless a solicitor’s underlying new-style cost-regime model is profitable then there can
only be one outcome: a closed department or a closed firm.

So, claimant law firms should be looking
to change their models; self-marketing, an investment in IT, and a change of who does what and when are all imperative.

Speculative claims

Other changes are also inevitable, such as a
general withdrawal of goodwill. This arises out of an increase in mechanisation, which means both parties will rarely speak to each other and will be unsure as to how much authority either person has when they do.

There will be an increase in speculative claims
on the portal as claimant lawyers have less time and a similar lack of money to fully investigate matters prior to submission.

There will be an increase in stage three settlements as claimant lawyers wish to push the boundaries in increasing general damages, resulting in an increase in the fixed fee and the amount of the CFA uplift for the lawyer. As lawyers look to match the previous fees, it is near inevitable that this will occur.

Further, there will be an increase in litigation once a matter falls outside of the portal. Again, pure economics will drive this. The sting in the tail, though, is the Mitchell decision. Mitchell is being ameliorated, but it remains valid. So, if a claimant is looking to issue, my strong advice is for all witness statements and paperwork to be ready in advance.

Defendant behaviour is also changing; allegations of contributory negligence in lower value EL, PL and OL cases could become a thing of the past as the cost benefit of keeping and settling a matter in the portal are immense.

Also, all communication with an insurer is going to be through the portal, so having an actual conversation with your opposite number on a matter may become something of the past.

Finally, what law firms are likely to be around in five years’ time? Clearly, the big are getting bigger and there are many firms leaving but, ultimately, the ones that will survive are those that can change, those that offer a better service, and those that are self-sufficient. SJ

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