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back to article Min of Justice to crack down on dodgy compo claims

Claims management companies will be prevented from offering clients cash incentives to bring damages claims if a Ministry of Justice (MoJ) proposal to tighten up the rules comes into effect. The move has been prompted by concerns about the way such companies market their services to the public. In his October 2010 report …

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  1. Wommit

    Not sure about these changes

    For instance, not allowing a successful claimant to recover costs from the defendant. Why not? If someone injured me, and a court decided that it was their fault why should I be out of pocket in any way?

    Similarly, but the other way round, if I make a spurious claim against someone, and the court decides that I'm just a thieving chancer, why shouldn't I be burdened with the costs. I may be stuck paying a pound a week for the next three centuries. But each payment would be a reminder that I lost.

    Perhaps a better, quicker and easier way to lower the number of claims reaching court is just to shoot every second solicitor.

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    1. JimC
      Reply Icon

      The asymmetry is the problem...

      If Mr Dubious claim wins he's in clover, and his lawyers charge 2 or 3 x costs and the company is down 3 times the cost of the case

      If Mr Dubious claim loses he won't pay any costs anyway, at the very worst he'll just declare himself bankrupt and the company is still down all their legal costs.. whilst the lawyers just balance it against the double and treble costs they got for the cases they won

      So the lawyers always win, the company (and its company profits that pay for all our pensions and their employees wages don't forget) always lose, and Mr Dubious Claim is on a no lose game...

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      1. Anonymous Coward
        Reply Icon
        Anonymous Coward

        The solution to what you describe

        The solution to what you describe is that courts don't approve inflated costs. From what I've heard, English courts aren't stupid in this respect and will often only award a small proportion of what the lawyers try to claim.

        Note also that you don't automatically get costs awarded just because you won in court. If what you won in court was basically the same as or less than what you were offered out of court then you are deemed to have been wasting the courts time and you pay.

        In England most stuff doesn't go to court: sensible solicitors are capable of guessing what the result would be if they did go to court so they sort it out between themselves. The courts strongly discourage people from going to court unnecessarily. They will, for example, refuse to accept a case if there is no evidence of the solicitors having tried to settle out of court.

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    2. Vic
      Reply Icon

      What are you reacting to?

      > For instance, not allowing a successful claimant to recover costs from the defendant.

      I've not read the full MoJ docs yet, but the article certainly didn't say anything like that (and, given that it came from Out-Law, I'd expect them to say if the MoJ was preventing the recovery of costs).

      What *is* being precluded from recovery is the lawyer's success fee, and the ATE insurance premium.

      A success fee is not a cost - it's a chunk of money that a lawyer awards himself for having won the case. He's already billed his hourly rate for the work he's done - albeit that bill is often conditional on a successful outcome these days. The success fee is just an extra bonus, and it is the lawyer who decides how big that bonus will be (up to a statutory maximum of 100% of normal fees). In the past, that bonus has been an extra award against the losing party; the MoJ is now saying that it is not a real cost of litigation, as the hourly rates are already permitted, and so a litigant must pay any such bonus out of his own pocket.

      ATE insurance is similar - this is an insurance premium payable so that, in the even of an unsuccessful prosecution, an insurance company pays the legal costs, rather than the lawyer sucking them up. Again, this is not a cost of litigation, this is a method for no-win, no-fee lawyers to offload the cost of risky litigation.

      > if I make a spurious claim against someone, and the court decides that I'm

      > just a thieving chancer, why shouldn't I be burdened with the costs.

      You should be, and you would be. But you will not be burdened with a doubling of the prosecution's legal bills when the lawyer thinks he could do with a big bonus this week, and nor will you be burdened by paying insurance premiums to insure the prosecution legal team against being over-zealous.

      These proposals seem, at first sight, to be a very welcome step in the right direction. Now all we need to do is to tackle the myriad apocryphal - or downright false - tales of litigants getting huge payouts for dubious "injuries"; perhaps then, people would do their thinking before they act, rather than after they lose in court. And maybe companies and other organisations wouldn't be so shit-scared of litigation (not losing, just paying to go through the courts) that they might actually do what's right, rather than just what's cheapest. Because that is called paying the Danegeld...

      Vic.

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      1. beerandbiscuits
        Reply Icon

        Vic - You are missing the point on conditional fee agreements

        No win no fee means just that - if the case is not successful, the solicitor gets paid nothing, when he may have done thousands of pounds worth of work. In litigation there is never any certainty of winning, so a solicitor who takes on cases on CFAs will deal with a certain number of cases where he will not be paid. The success fee is not a bonus designed to give him a freebie - it is the compensatory element on successful cases to balance the cases where nothing is paid.

        This ensures that the solicitor is happy to take on CFAs in the first place.

        Why, you might ask, do we care if CFA's are taken on? The answer is that for the vast majority of people there is simply no other way of getting access to legal representation. Legal aid in civil cases is almost non existent - only those on benefits need apply. For those on ordinary incomes, the CFA is the only way they will be able to get advice or representation without potentially bankrupting themselves.

        The ATE insurance is designed to cover the costs of the other side if the case is lost and a costs order is made against the unsuccessful CFA funded litigant. It does not benefit the solicitor dealing with the case in any way.

        The worry with these proposals is that solicitors will not be able to deal with CFAs without making a loss so they simply won't deal with them. That means that most people will not be able to get legal representation. The only people who will benefit from that are the potential defendants, most of whom are quite capable of affording the legal costs anyway.

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        1. Vic
          Reply Icon

          No, I'm not...

          > The success fee is not a bonus designed to give him a freebie - it is the

          > compensatory element on successful cases to balance the cases where nothing is paid.

          That's a very positive spin you're putting on it...

          An alternative view would be that the hourly charges quoted by the solicitor are insufficient to make this business model pay - so he adds extra charges where he can. IOW, he disguises the true cost of litigation by quoting an unsustainable headline rate which is then bumped up on success.

          That's not a good basis for a free market.

          And the MoJ agrees that these charges are not part of the cost. For once, government seems to have got something right.

          > The worry with these proposals is that solicitors will not be able to deal with CFAs

          > without making a loss so they simply won't deal with them.

          There will always be a goodly number of cases which are readily won. CFAs will always be with us. But the market will shrink - the chancers will no longer have such a good probability of payout with such minimal risks. So there will be a tendency for the less well-founded cases to fall by the wayside, whilst simple cases with clear liability will still be dealt with as CFAs. This is a Good Thing (tm) all round - unless you are a dodgy CFA solicitor.

          > That means that most people will not be able to get legal representation.

          Nonsense. Most people will be able to get legal representation - but with shaky cases, they will undoubtedly have to do some of the funding themselves. Again, a Good Thing.

          > The ATE insurance is designed to cover the costs of the other side if the case is lost

          From http://www.thejudge.co.uk/after-the-event-insurance :-

          "After the Event Insurance is a type of legal expenses insurance policy that provides cover for the costs incurred in the pursuit or defence of litigation."

          Reading further, at http://www.thejudge.co.uk/features-of-after-the-event-insurance :-

          "In addition, most clients also opt to insure their own disbursements, including Counsel’s fees."

          I'm deliberately quoting from an insurance broker, because they are selling the product that you claim does not exist.

          > It does not benefit the solicitor dealing with the case in any way.

          The above reference refutes your point.

          Vic.

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          1. beerandbiscuits
            Reply Icon

            reply

            "An alternative view would be that the hourly charges quoted by the solicitor are insufficient to make this business model pay - so he adds extra charges where he can. IOW, he disguises the true cost of litigation by quoting an unsustainable headline rate which is then bumped up on success."

            If that's the way you want to look at it, but it is cynical in the extreme. Bear in mind that these arrangements were unlawful until the 90s and only introduced by politicians who wanted to find an alternative way of funding cases when legal aid was being cut. And they did it in the face of protests from the lawyers who didn't want the change.

            "And the MoJ agrees that these charges are not part of the cost."

            At the moment, yes, but their view changes on a regular basis. I don't agree with the current view which ignores the reason why CFAs were allowed in the first place.

            "There will always be a goodly number of cases which are readily won. CFAs will always be with us. But the market will shrink - the chancers will no longer have such a good probability of payout with such minimal risks. So there will be a tendency for the less well-founded cases to fall by the wayside, whilst simple cases with clear liability will still be dealt with as CFAs. This is a Good Thing (tm) all round - unless you are a dodgy CFA solicitor."

            Most badly founded cases fall by the wayside anyway. CFA solicitors review the cases at the outset and if they are badly founded, the solicitor refuses to take the risk of not getting paid. You seem to be under the impression that CFAs are only, or mainly, used in poor cases but that is not the case. They are mostly used by genuine litigants with real problems who have no other way of bringing a case.

            "Nonsense. Most people will be able to get legal representation - but with shaky cases, they will undoubtedly have to do some of the funding themselves. Again, a Good Thing."

            Except that most people won't be able to afford it, including those with good cases.

            "From http://www.thejudge.co.uk/after-the-event-insurance :-

            [quotes omitted]

            I'm deliberately quoting from an insurance broker, because they are selling the product that you claim does not exist."

            Disbursements are the expenses that the solicitor has to pay out. They do not include his own fees.

            With regard to the main aspect of the article, relating to claims companies offering cash incentives, I do agree with the change though, as that does encourage spurious claims often with claimants lying to create the claim, not because of the perceived damages but because of the cash they can get up front. We need to bear in mind though that CFAs are not only used in these situations; they are offered by many firms on all types of civil claims.

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        2. Naughtyhorse
          Reply Icon
          WTF?

          get the fuck outta here!

          So CFA's mean I pay extra legal costs cos my solicitor lost his last case.

          which means that (correct me if i'm wrong);

          A. Greed McBastard makes a bogus claim.

          Sue, Grabbit & Scarper excersise poor judgement in taking on McBastards case.

          and I get to cover S,G & S losses.

          FTW?

          how, pray, is that fair?

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          1. beerandbiscuits
            Reply Icon

            @ Naughtyhorse

            At the moment, no, but that is what the proposed reforms want to bring in.

            As matters stand, you don't cover the costs at all, unless you are the person who is successfully sued. Your solicitor receives nothing from you in any event (bar perhaps a small amount of the fee (usually no more than 4%) which for reasons that are too complicated to go into here are not recoverable from the loser). If you lose the case, the solicitor gets nothing. If you win, in the vast majority of cases, the costs, including the success fee, are paid by the losing party.

            One of the things that is being proposed now is exactly what you say. The proposal is that the success fee is paid out of any damages you recover, i.e. you do have to pay for the lack of success on another case. I agree that this is fundamentally wrong.

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            1. Anonymous Coward
              Reply Icon
              Stop

              Didn't understand his point I think

              Naughtyhorse was talking about whether or not the "success fee" is a real indicator of the costs of this particular case. It has been suggested that it is actually a vehicle for offsetting the costs not recovered from other unrelated unsuccessful cases.

              Inasmuch as whether or not this should be recovered from the losing party as a cost for this case, I agree with him that this is unreasonable and is an issue for the business of the lawyer involved, not the losing party in the case.

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  2. Refugee from Windows
    Alert

    Growing like Topsy

    These claims management companies are springing up like weeds, we've even got one round the corner. They don't encourage people to look after their own safety, possibly in the belief that they can claim for no looking where they are going, not using the right equipment or generally minding things themselves.

    I suggest that they restrict the advertising for these, but the "we'll pay you up front" ones are too far. Most of these claims never get to court anyway, I would suggest that some are forced to go (by having it registered with them) and the Ambulance Chasers burdoned with the costs of their failure.

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  3. MinionZero
    Joke

    Considering past examples of how mad this world is...

    ... I guess high paid lawyers will now sue the Ministry of Justice on the basis this report is causing them emotional stress!

    (Unfortunately the biggest winners of compensation are often the lawyers :( ).

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    1. Intractable Potsherd
      Reply Icon
      Unhappy

      Unfortunately ...

      ... the winners of any legal action are the lawyers. When I look at the pain and anguish caused by divorce lawyers in particular, I begin to agree with Shakespeare.

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  4. My Alter Ego

    About bloody time

    Got done for whiplash when I went into the back of a Discovery in my Westfield at very low speed. Absolutely no damage to the Disco, and all I needed was a nose cone and radiator.

    Weight of Disco + 4 occupants = 2100kg

    Weight of Westy + Me = 500kg

    Engergy absorbed in impact by Westy = 80%

    Completely my fault, but the driver of the disco drove on for about 50yds before she realised I hit her, and yet she and her sons got whiplash. I really should have made regular visits to the football club to see if they were still playing whilst "suffering" from whiplash.

    That's apparently what happens when you have an accident with somebody who lives in house called Dun Roamin.

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    1. The Fuzzy Wotnot
      Reply Icon
      Happy

      Nasty.

      Sound more like "Dun Robbin" to me!

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    2. Intractable Potsherd
      Reply Icon

      Had the same ...

      ... with a unpleasant woman whose car I ran into the back of at parking speeds. Both identical Citroens. My car had a dislodged front foglight where it had been poked by her car's exhaust, hers had nothing (the deformable bumpers did their jobs. Daft bint admitted that she stepped on the brakes because she'd dropped her mobile phone! Nonetheless, she put in a claim for whiplash, and got it because the insurance company wouldn't fight it.

      Yes, I am still bitter about it!

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  5. Anonymous Coward
    Anonymous Coward

    Mostly good stuff...but

    As someone else pointed out, not claiming costs sounds a bit dodgy - you shouldnt be out of pocket when its somebody elses fault.

    But on a similar vein, why should you be able to make a profit? A large part of a £5000 "whiplash injury" cheque is actually paying to cover against any future problems which maybe caused by it. I have a friend who was (un)lucky enough to have 2 no fault accidents in a month - he saw the same doctor for "whiplash" after each accident, and wasn't even checked - a nice £10000 cheque for him. Give that money to the NHS instead, and you remove a big incentive to make fraudulent injury claims

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  6. g e
    Flame

    I wanna live in a world where...

    All the 'Warning, Sharp' labels are taken off kitchen knives,

    bags of peanuts no longer have signs saying 'warning, may contain nuts',

    where judges tell people suing for stubbing their toe are told to look where they're going, pay costs.

    When all the lame obvious safety labels are gone and when all the pikey compoholics are told to grow some common sense, Darwin will mop up the rest.

    Killing no win no fee scumcorps will be a great step in the right direction.

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    1. Loyal Commenter Silver badge
      Reply Icon
      Headmaster

      A good point

      But I feel compelled to point out, that since peanuts are not actually nuts*, a warning that they may contain nuts probably refers to the fact that they may actually contain traces of real nuts from the factory in which they were packed, to which people may be severely allergic without being allergic to peanuts themselves.

      *peanuts are actually legumes, hence the 'pea' bit of the name, the 'nut' bit is a misnomer.

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  7. Anonymous Coward
    Anonymous Coward

    title

    the answer to this is a system of legal aid.

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  8. JaitcH
    FAIL

    Courts can 'tax' claimed costs to regulate excessive claims

    Denying costs to a successful plaintiff is denying justice. Courts can examine claimed costs and adjust them to a reasonable, proven amount.

    Just because business finds it hard, too bad, most of the circumstances giving rise to claims can be avoided if businesses chose not to cut corners.

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  9. Boris the Cockroach Silver badge
    IT Angle

    perhaps a better solution

    would be to force claims companies to breakdown the £10 000 successful claim by Mrs Sproggins for falling over on a wet floor into its component parts

    £5000 3 months lost wages( including £2000 rent arrears)

    £1500 repaid to DSS for benefit claims

    £1000 Lawyer insurance

    etc etc etc

    But would it stop the numbnuts people I work with when one of them said

    "If i put my hand in with the robots and it gets crushed, I can sue the employer for lots of cash"

    This became a popular idea until I pointed out that to do so would mean they'd ignored the safety lecture given by me, ignored the warning signs on the machines, and bypassed the safety lock outs preventing people from sticking their hands in with the robots.

    So instead of you getting a nice £50 000 payday, you'll get about £5000 and then we'll sue you for damaging the machines.

    Have a nice day

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  10. JP19

    Unbeliveable

    The Ministry of Justice decides that the justice defined by politicians and dispensed by their judges has led to a "compensation culture" which "places an unnecessary strain on businesses of all sizes, who fear litigation and are subjected to increasingly expensive insurance premiums".

    True and undesirable, but, beyond belief that they try to blame companies assisting the public in obtaining this justice rather than the dickheads who defined and dispense it.

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  11. SirTainleyBarking
    Grenade

    Reap what you sew

    The rise of no win no fee solicitors was fuelled in my belief by the actions of the legal teams on behalf of clearly culpable companies delaying proper compo claims as long as possible in the hope that the poor sod claiming would either run out of money and / or give up.

    Those who had the stamina would often find that the fault parties lawyers would suddenly settle out of court at the last minute for the full amount.

    Yes there are chancers out there, but there always will be scumbags who milk the system.

    Clipping the incentive culture to making spurious claims may help.

    As for companies whining that the insurance premiums are going up? Cry me a river

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    1. JimC
      Reply Icon

      > insurance premiums/cry me a river

      Who do you think pays for the extra premiums? The company executives? Dream on. They are paid for primarily by the customers, and probably patrially by the stockholders. The stiockholders by and large are financial companies and the money goes to paying pensions and the like. So ultimately who's paying? That's right, you and me.

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