The changing face of UK injury claims
Monday 22 October 2012
There is never a good time to suffer a life-changing injury. However, some occasions prove much more inconvenient than others. 2013 could be the year things get tough for accident victims.
In 1995, the government introduced Conditional (No Win No Fee) agreements in personal injury cases, to widen access to justice and transfer the burden of funding litigation from the state, back to the claimant. From that point on, the claimant was required to pay up to 25 per cent of their compensation to an accident claims solicitor. Accordingly, winning cases would pay for those that were lost, and law firms were able to take on all cases with reasonable prospects of success.
Personal injury awards, being compensatory, are calculated to meet the injured person's precise losses. Giving up 25 per cent therefore left injured people undercompensated, and in serious cases unable to afford the future care or therapy. Recognising this, in 1999 the Labour government legislated to transfer the burden of funding from the claimant to the defendant, so the insurers of the losing defendant would pay not only the base legal costs but also the claimant's costs insurance and the success fee. Good news for injured parties, as it meant that accident claims could be brought at no cost to the claimant: No Win No Fee became Win No Fee, Lose No Fee. Meaning a personal injury lawyer could take the case with the mildest of prospects, because they would get a success fee from winning cases to cover those lost.
That is the current system, and it works well from a claimant perspective. Insurers complain at the number of claims under the current No Win No Fee system, but the increase has only been in road accident claims and those went down by 4 per cent this year. They also complain that they should not have to fund the opponent's insurance and success fee.
Ministers do not accept the principle of full compensation and want the injured claimant to contribute towards the cost of bringing a case. Claimants will effectively return to funding cases from April 2013 again, again being asked to pay for a success fee, insurance, and up to 25 per cent of damages, which will no longer be recoverable from the defendant.
But, can we now go back to the old system? The landscape has changed enormously since 1995, when there was no advertising of legal services and referral fees were prohibited. Now, there are financial inducements and advertising campaigns to bring claims and the public perception is that No Win No Fee now means 100 per cent compensation.
This depends on the type of case. Imagine that someone with a whiplash injury from a rear-shunt car crash has a personal injury claim that will win, and win quickly. They are not interested in litigating and certainly not in the cost associated with going down that particular route, a lawyer seeking a costs contribution from such a client will find they don't get many such clients.
The situation is very different in more complex and higher value claims, where the risk of losing is significant and the legal costs are high. In a brain injury case, the lawyer - acting on a No Win No Fee basis - may spend six figures bringing the case, but litigation is uncertain and he may end up losing on liability. In this scenario, the claimant would walk away but the lawyer would be left with a big hole in their books and a profound aversion to risk. So, either he charges a 25 per cent success fee to his client or stops doing the work. Put simply, a claimant with devastating permanent injuries is faced with either losing a quarter of his compensation or risks not finding a lawyer who can take on their case.
With this in mind, the government will succeed in delivering some significant savings to the insurance industry in 2013, arguably at the expense of the seriously injured. The government has announced their intention to raise the small claims limit from £1,000 to £5,000. What this means is that an injured person will no longer be able to recover legal fees from the opponent in cases worth up to £5,000, so they will have to pay the lawyer themself, and risk ending up with little or nothing, or else run the case without legal representation.
So, our whiplash victim, who did not want to pay anything in legal fees, will end up having to pay all legal fees. In this climate, the best legal advice must be to avoid any accidental injury at all costs from April 2013, be that serious or minor. Oh, and do take extra care, because the government has just announced that it plans to scrap 3,000 health and safety regulations.
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