No win no fee – The battle!During the era of Claims Direct and The Accident Group many solicitors started personal injury departments. It was seen as a very profitable way to increase your firms’ fees. However, even for solicitors the dream was short lived and also had terrible consequences. The insurance companies were not going to sit back and see millions of pounds being taken from them. Their objection was not paying out injured people’s damages but the fact that they were having to pay for these claims management companies to find these cases also the extortionate loans that the injured people were having to take out to fund the whole no win no fee procedure. They firstly attacked the cost of the before the event insurance in Callery & Gray. This was based on whether Claims Direct premium level was reasonable. The effect of this case was that large numbers of solicitors doing small claims work were not being paid and the courts were jammed with proceedings dealing with costs as the insurance companies refused to pay until the outcome of the litigation. This matter was finally resolved in the House of Lords. However, the time delay the solicitors faced from finishing the case to actually being paid crippled many solicitors. The case meant that the insurance companies only paid what was considered to be a reasonable premium. The short fall was swallowed by the claimant through his damages. In effect, the insurance companies did not manage to kill the no win no fee boom but merely saved themselves some money off the premium and years of interest in not having to pay the solicitors. However the insurance companies did not stop there and have to date still not stopped trying to put solicitors and claims management companies under extreme pressure by mounting case after case challenging the whole concept of no win no fee. What they have succeeded to date is to significantly change the whole face of the industry. Previously the cost of buying cases from claims management companies was recovered from the claimant, however because of all the publicity the reality is in the majority of cases the cost of acquisition is now borne by the solicitors themselves. This means that solicitors profit costs have been significantly affected with them having to pay anywhere between £450 to £700 a case. In addition pressured by the government has brought in fixed costs in cases which are worth under £15000 for damages. On a minor whiplash case after the solicitor has paid for acquiring the case he may be left with as little as £600 for a case which can take him anything between 7 – 14 months to resolve. This has meant that an area of law which was once profitable for solicitors is now questionable as to its profitability. One way that solicitors have cut their costs is to employ a vast army of paralegals to carry out this no win no fee work. The surge in paralegals available for personal injury firms and other areas of work has come about due to the unfortunate state of the legal profession. Many more students are going into law than ever before, however the training contracts enabling them to qualify and eventually become solicitors are not available. Therefore only the elite have a good chance of ever qualifying. This has meant that many law graduates are available to be employed by personal injury firms to carry out their no win no fee work. It is unfortunate that these law graduates could be carrying student loans of up to £20000 and yet be earning as little as £15000 per annum, with little hope that they will one day qualify and earn the sums of money that they were expecting when they embarked on a law degree. There is a question which must be asked whether the no win no fee structure which has significantly cut solicitors costs has lead to a lower standard of quality because solicitors are employing paralegals in order to cut costs. The insurance companies are attacking solicitors further on two fronts: Massive litigation has commenced against the 700 or so firms which were on the panel of The Accident Group, the allegation is that at the time when solicitors were paying The Accident Group for cases they were in breach of the referral code prohibiting them from doing so. Therefore it is alleged that the solicitors have to repay either to the claimant or to the insurance companies who paid or funded this referral fee in order to take these no win no fee actions. These run into millions of pounds for the panel. If the banks and insurance companies are successful this would potentially lead to a great number of solicitors going out of business and becoming personally bankrupt. As many of these practices are high street solicitors it will mean that we could see a situation whereby the man on the street will not have access to his local solicitor to carry out not only no win no fee litigation but other types of work essential like conveyancing crime, matrimonial, child welfare and immigration. The insurance companies have also been campaigning in the national press in order to promote the fear that we are following Americas footsteps in creating a compensation culture by promoting the no win no fee claims process. They have been doing this on two fronts. Firstly publicising cases which would enrage the common man. Examples of this are the school cases. You may have read cases where parents are taking proceedings against schools for not preventing school bullying. In addition cases where a teacher slipped on a chip in the canteen. This has lead to schools taking radical steps like refusing to take children on school trips. In addition they have stopped children playing with conkers in the playgrounds. Also cases where prisoners have taken action for falling off bunk beds or slipping on soap in communal showers. All this has been blamed on the ability of people to pursue cases on a no win no fee basis. However there are always two sides to the story. Firstly, many of these sensational cases are simply not won. Secondly, what they do not appreciate is that employers local authorities and even schools have now adopted much safer procedures because they are fearful of expensive litigation. |
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