Archive for April 11th, 2012

Guest Law Review – Jackson Report Update

A guest law review, from Michael Hardarce Partner at Pannone LLP.

Every six months or so, I lecture to anyone who’s interested on the timeworn subject of the reforms to civil litigation costs arising from the report of Lord Justice Jackson, originally published in early 2010. I find myself approaching the six month mark again and in collating all the news I take the opportunity to share my views with you all.  I won’t bore you with the detail, because frankly it changes every five minutes, but the overall themes remain the same.

On a personal level, it’s a sore point as a personal injury solicitor and Partner at Pannone for the last 15 years, that personal injury law has been in the frontline of changes to law and procedure for the whole of that time.  In my view, that boils down to the fact that in most cases, the paying party is an insurer and insurers really don’t like paying anyone. They can just about bring themselves to pay deserving, injured claimants, but they really don’t like paying their solicitors.  I’m not passing any judgment on that, after all they are commercial organisations with their eye fixed on the bottom line, but it does underline why personal injury litigation is always in the spotlight.

You can easily trace where we are now back to the late 1990’s firstly with the Woolf reforms and then the subsequent removal of legal aid for personal injury claims, accompanied by the recoverability of success fees and after the event insurance premiums from the paying party.  Add into the mix the legalisation of referral fees in 2002 and you had a coincidence of events which resulted in a transformation of the volume end of the personal injury marketplace.  In came claims management companies, the larger ones advertising on TV, much to the distaste of the middle classes (many of them lawyers) who didn’t like access to justice being taken quite so literally and the smaller CMCs, perhaps being less circumspect, but overall presenting a quick and easy route to compensation for all.  Add to that insurers realising the value of the “product”, namely the injured policyholder and selling their details onto their panels of solicitors, we are now in a situation which nobody could possibly have foreseen. Personal injury claims, even straightforward whiplash claims, are being sold for sums approaching four figures to RTA “factories”, whose economies of scale can squeeze a profit from even the tiniest of margins from the fixed costs available.

Many people have described the current position at the volume end of the RTA market as dysfunctional and I can’t disagree with that.  Everyone, on both sides of the fence, have to acknowledge their role in creating that situation.  What it has certainly done is create an easy target for insurers to take aim at.

Going back to Jackson, he was adamant in his report that his wide-ranging recommendations should be implemented as a whole and not on a piecemeal basis.  That was met with a healthy degree of scepticism, but surprisingly it looks now as though that will largely happen.  The insurers, through a well-coordinated PR campaign and a fortuitous change of government, have the wind in their sails and it’s clear now that we have a timescale for implementation that will see a whole raft of major changes implemented by April 2013, continuing on through next year.

While the detail of these changes has yet to be sorted out, these will include banning referral fees (in itself an incredibly problematic task given the different shapes and forms they can take), ending recoverability of success fees and insurance premiums from the paying party, introducing one way costs shifting, allowing contingency fee arrangements and (one for the claimants at last), increasing general damages by 10%. There is also the very real prospect of the costs available to claimant solicitors in low value RTA cases being substantially reduced by the end of next year along with fixed costs across the fast track for most types of personal injury.

Ultimately, the stated aim of the insurers is to drive cost out of the personal injury market.  For them, the referral fee ban is a sideshow. If they can reduce solicitor’s costs, then there is less value in the “product” and no profit to be made from selling personal injury claims.  It’s clear that if these changes are implemented as expected, they will achieve their objective.

Where will that leave us in two years time? The marketplace will have changed and I believe the overall volume of personal injury claims will reduce, particularly amongst the least sophisticated consumers whose route to compensation over the last few years has been through small claims management companies, who won’t be around, at least not in their current form.  Hopefully, we will have a clear view ahead and some peace and quiet to get on with our jobs, representing injured claimants and earning a reasonable living.
Michael Hardacre is a Partner in Pannone Affinity Solutions. His background is in personal injury work

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