Practice trends: personal injury

On the back of papers written by the Association of British Insurers (ABI), Law Society and Association of Personal Injury Lawyers (APIL), the Department of Constitutional Affairs (DCA) has confirmed that it will shortly begin its consultation and review of the entire PI claims process.

Few practitioners predict a 'light touch' approach from a government which they say will focus on the stake they now have in their client's litigation, in view of the manner by which they buy and are paid for their work.

Compensation culture

In its May 2004 report, Better Routes to Redress, the Better Regulation Task Force concluded: 'Unfortunately because of all the stories we see in the media and the past activities of claims management companies, claiming redress is viewed by many as not the right thing to do.'

Neil Block QC and Bernard Doherty, of 39 Essex Street, saw this as the restoration of the profession's status. 'We are not, it seems, vultures picking over the carrion of the nation's public services, nor vampires sucking the blood from the helpless and turning the nation's young into self-pitying handout junkies,' they noted in their article No Compensation Culture '“ It's Official (Legal Week, February 2005).

Block and Doherty believe, despite the profession's efforts, some people will always perceive a rampant compensation culture, others that multinationals and the state have been left virtually free to injure as they please. In short, personal injury lawyers can't do anything to alter human nature and prejudice.

Perhaps they were a little hasty. Certainly, Peter Williamson, chair of the Solicitors Regulation Authority, appeared sufficiently concerned at the role lawyers have to play in modifying public perceptions to have written to PI lawyers this February, warning: 'Solicitors who allow referral arrangements to undermine their role as independent advisers let down their clients and the profession. Public confidence in solicitors has been damaged by a number of recent cases in which solicitors have placed their own advantage above their clients' interests.'

Where there's blame, there's a claim

'It has never been clear why lawyers or anyone else dependent for being paid on the success of a claim should be inclined to back doubtful cases,' claimed Block and Doherty. Alas, for claimants, insurers, regulators and government, the horse had not so much bolted as retired to stud.

In its December 2005 report Care and Compensation, the ABI argued forcefully for a change to the existing system which, it argued, was overly complex and adversarial and, as such, deterred legitimate claimants.

Claimant solicitors may have found the ABI's criticism that it takes far too long to get compensation to claimants just a little rich. Few, though, would seriously argue against the ABI's contention that the system diverts too much money to 'claims handlers' '“ some £2bn every year: nearly 40p for every £1 paid in personal injury compensation, with more money going to claims handlers than claimants in a significant proportion of small claims.

The ABI claimed that undervaluing the importance of getting people back to good health and back to work as quickly as possible, rewarding 'poor and sometimes misleading advice' and encouraging 'exaggerated and frivolous' claims had all contributed to the systemic failure of the personal injury compensation system.

The Law Society and APIL's own papers agree with the principle that improvements are needed in current procedures for claims for compensation for personal injury '“ although they agree with the diagnosis, they disagree with the ABI as to the cure.

Roger Bolt, senior partner of Islington firm Bolt Burdon Kemp says: 'For the past ten years, the ABI's PR machine has subjected government to a barrage of proposals ostensibly to improve the claims process; but this is just a thinly disguised veneer. It is hard to resist the conclusion that their sole motive is to improve profits for their shareholders.'

Bolt thinks the ABI is getting its message across. He points to the fact that all recent state intervention in the PI system has been designed to cut costs and claimants' access to the system.

'In the last ten years there has not been a single act or initiative from government to assist claimants,' he says.

Pandora's box

The insurance industry is pressing to bring more claims within the small claims limit and to allow insurers to deal directly with injured persons. Conversely, the profession argues this would leave people without independent advice and/or vulnerable to pressure from unscrupulous insurers to settle cheaply. The Law Society suggests that a streamlined PI process will ease concerns about cost and delay.

The problem, argue insurers, is more fundamental. The Access to Justice Act 1999 has proved to be a Pandora's box, they say, positioning a 'bewildering range' of claims management companies between injured claimants and lawyers.

The ABI questions, with some justification, what 'possible public good comes from the substantial referral fees that claims management companies receive and whether the industry as a whole would be better if referral fees were once more prohibited '“ the ethical case against this unsavoury trade is surely as strong as it ever was.'

Myatt No 2

The decision of the Court of Appeal in the conjoined appeals in Garrett v Halton Borough Council and Myatt & Ors v National Coal Board [2006] EWCA Civ 1017, has been considered elsewhere in these pages. Of more immediate interest is the satellite, costs, litigation (Myatt & Ors v National Coal Board & Anor (No 2) The Times 16 March 2007), which provides a salutary warning of the danger that, by their nature, conditional fee agreements readily create conflicts of interests.

The claimants, former coalminers, had sued the National Coal Board (NCB) for damages for noise-induced hearing loss. Their claims were settled for about £3,000 to £4,000 in each case and a detailed assessment of costs was ordered. Master Wright, who conducted the costs assessment, found on a preliminary issue that conditional fee agreements which the claimants had entered into with their solicitors were unenforceable, with the consequence that their after the event legal expenses insurance was invalid.

The Court of Appeal dismissed the claimants' appeal against that decision. The NCB sought an order that Ollerenshaws, the claimants' solicitors, pay the costs of the appeal.

Lord Justice Dyson said the four cases against NCB were test cases and about 60 other clients had entered into similar unenforceable conditional fee agreements with the solicitors. The solicitors' profit costs were about £4,000 in each case, so that about £250,000 was at stake for them in their clients' appeals. Of course, the four claimants also had a financial stake in the appeals, as the shortfall in their recoverable costs would be met out of their damages.

Dyson LJ ruled that the court had jurisdiction under Supreme Court Act 1981 s53 to order that an unsuccessful party's solicitor should pay some or all of the successful party's costs where the litigation was pursued by the client for the benefit, or to a substantial degree for the benefit, of the solicitor. Ollerenshaws were ordered to pay 50 per cent of the NCB's costs of an appeal in the litigation.

Bolt is concerned at the potential consequences of the decision in Myatt No 2. 'It seems wrong that a government body sought to recover its costs from the claimants' solicitors when, because of the government's own policy to withdraw legal aid, they had no choice but to pursue the litigation under a CFA.'

He thinks cases like Myatt No 2 may lead to 'a reluctance on the part of claimant solicitors to pursue difficult cases'. He concludes this 'could lead to an unfortunate contraction in the parameters of negligence litigation'.

100 per cent lawyers: 100 per cent compensation

'Since the advent of CFAs it has been like the Wild West. Opening up the system to the private sector has arguably been a disaster for consumers,' says Joel Leigh, a partner in Hampstead firm CKFT.

Leigh explains that the system allows claims farmers to encourage unmeritorious claims and may also be seen as rewarding claimant solicitors who force through settlements, often in conflict with their client's interests.

'There have been huge problems with claims farmers and some well-publicised examples of them adopting dubious practices which have offered claimants a remarkably bad deal. In fact, I recently settled a client's claim for about 17 times what she was told she might have to accept by her previous, farmer appointed, lawyers.

'I'm even more suspicious of insurers' motives and their own 'third party capture schemes', where insurers contact the claimant direct and encourage them to use their preferred panel solicitors. The potential for conflict is enormous,' he continues.

Indeed, Leigh disagrees with any firm purchasing leads, whether from farmers, insurers or otherwise. Instead, he favours 'solicitors' collectives like Injury Lawyers 4 U (IL4U), who offer a better deal for claimants and are able to fight claims farmers through advertising campaigns funded by collective revenues'.

Regulation of claims management services

Despite the efforts of IL4U and the like, it remains difficult to see how the adversarial culture can be ameliorated whilst claimant and defendant solicitors have no room to manoeuvre. After the event insurance and success fees have scuppered any prospect of co-operation between the parties.

The first skirmish of what may be a bloody battle is imminent; the final elements of the regulation of claims management services under the Compensation Act 2006 will be brought into force on 23 April. From that date, any business providing regulated claims management services that is not authorised, exempt or subject to a waiver will be committing an offence and liable to prosecution.

And the claims managers' reaction to regulation? Accidents Direct announced on 3 April that it is on the lookout for new panel members. It claims an anticipated growth rate of 200 per cent over the forthcoming year on the back of a successful television advertising campaign, with, it says, an 80 per cent acceptance rate across its existing panel.

The DCA says that it had received over 1,000 applications for authorisation by the 16 February deadline. Presumably all of the applicants (and their financial backers) see value in the sector.

It appears either the public is less reticent about suing than it was in 2004, or claims managers and claimant solicitors are less discerning than had been thought. Or both.

Access to justice

Lord Falconer said last year: 'Fundamentally, this is about access to justice. Doing more for people who need the full protection of the law and clamping down hard on the practices and the people whose sole aim is to milk the system for all they can.'

And the only viable solution?'Properly remunerated non-means, merit-tested public funding for claimants, but that's just not going to happen,' says Bolt, who predicts instead that the DCA review will deliver: 'A blurring of the margins, enabling some claimants to be cut out of the system because the price of justice for them is just too high for insurance companies and their shareholders'.