Having failed to persuade the legal profession to reduce its fees, the Lord Chancellor now plans to limit access to legal aid to cases that have at least a 75 per cent chance of success and encourage anyone else who wants to go to law to enter into a no-win, no-fee agreement with his or her lawyers to pay the costs.
Conditional fee arrangements already operate in cases of personal injury. Part of the Lord Chancellor's solution is a proposal to extend the conditional fee arrangement to all proceedings, other than criminal cases and matrimonial related disputes, with effect from April.
But this does not mean a licence to go to law. Whoever undertakes to pay the legal costs will still need to be satisfied that the policy holder has a good chance of winning.
The conditional fee arrangement allows clients to minimise their financial exposure. In such cases the client will visit his solicitor, who considers the strength of the case. If he is satisfied that the individual has a good chance of winning he will negotiate a success fee with the client. This agreement means that if the solicitor loses the case the client is not liable to pay his fees. However, if the case is won, the solicitor is entitled to a success fee.
The solicitor, in turn, will require the client to take out insurance cover against the risk of losing the case and becoming liable for the opponent's costs. The insurance company will only agree to underwrite the client's legal expenses if the solicitor has entered into a success fee arrangement with the client.
As the Law Society has already pointed out, the success of the conditional fee arrangement will depend largely on how willing insurance companies are to offer policies to cover a broad range of actions and underwrite the risk of being liable to pay the insured's legal costs.
This type of insurance policy, which offers the client protection against paying out legal expenses after a claim has arisen, is still a relatively new idea. Most forms of legal expenses insurance are typically tacked on to the end of a household insurance policy and are not tailored to address a particular claim.
Problems can arise when it comes to relying on such policies either because they do not cover the type of claim that has arisen or the policies are unduly restrictive in the choice of solicitors the client can use.
There are some policies that do offer legal expenses insurance cover when the individual has already decided to sue someone. Accident Line Protect, which was launched in 1995, offers policies to cover the cost of legal expenses of up to pounds 100,000 in personal injury claims. Road accident claims are covered by a premium of pounds 92 and other claims by one of pounds 156. This cover is offered in conjunction with the Law Society.
Law Assist, run by Greystoke Legal Services Limited, also provides "after the event" cover and a policy under which the litigant's costs are paid if the client loses the case, plus the option to insure against his or her own solicitor's legal costs, regardless of whether he or she wins or loses the case.
Those who want to take out cover with Law Assist must consult a specialist solicitor from the Law Assist Panel, who will consider the merits of the case. There is a charge of pounds 34.50 plus VAT for this service. If the case is taken a premium is payable for the cover. The minimum fee for up to pounds 2,000 of insurance cover is pounds 258, rising to pounds 2,740 for up to pounds 50,000.
Anyone who decides to take out such policies should check the expenses that are covered by the policy. Does it cover not just solicitors' costs but barristers' fees and experts reports, such as a doctor's opinion?
Anyone considering entering into a conditional fee arrangement should shop around solicitors. It is important to get an assessment of the strength of your case. Always establish whether the person you are suing has the ability to pay damages if he or she loses the case.
Always check the solicitor's reputation and success rate. The solicitor offering the best deal is not necessarily the one most likely to secure a favourable result.
q Law Assist: 0181-771 7772; Accident Line Protect: 0500-192939.