Saturday, 9 April 2011

Government Attack on Justice

If you have a compensation claim you might have hired a lawyer who, if they are any good, will be fighting with all their skill, experience and passion to get you as much money and medical treatment as they can after you have been injured. In some cases, particularly involving serious injuries, your case maybe of great importance to you and your future, especially if you have a family to provide for. Proposed changes by the government to the compensation system will attack the rights of injured people and add insult to injury just when they are at their most vulnerable.

At present most law firms deal with compensation claims on what is called a “no win no fee” basis. The basic principle is that if the lawyer if not successful, they will not charge the client for dealing with the case. This gives the client the assurance that they do not have to face a legal bill if the claim does not succeed. The formal name for this sort of agreement is the Conditional Fee Agreement (CFA).

Clearly under this system, lawyers will generally be most interested in taking on cases they think have at least some chance of being successful; no one wants to put in a lot of work for no good reason. Litigation is generally an uncertain business though and from time to time they will deal with cases that are not successful. If a case is not successful, they will not charge the client and the costs involved have to be written off.

In the late nineties, legal aid was stopped for personal injury claims and the CFA was introduced as a way for everyone to have access to a lawyer without having to use legal aid. As a way of making up for the uncharged work carried out on unsuccessful cases, lawyers are entitled to charge a “success fee” on successful cases to make up for the work on unsuccessful cases. The success fee is a percentage uplift on the legal bill that they may claim from the losing side.

When CFAs were first introduced, it was suggested that lawyers on winning cases might charge as much as a 100% success fee, thereby effectively doubling their pay for a successful claim. Of course, the possibility of getting a success fee will helpfully motivate an injured party’s lawyer to win their case; if they don’t win the lawyer won’t get paid. This is good news for clients as it means the lawyer has a vested interested in winning their case. Over the years since the introduction of the CFAs, the success fee has, through legislation and the decisions of judges, been reduced so that an average success fee is usually less than 25% especially for road traffic accidents. With the exception of winning at a full trial (which is a rare occurrence compared to the majority of claims that are simply settled before court) the 100% uplift is now very rare.

If a claim is unsuccessful, the injured party will not receive a bill from their own lawyer. But if formal legal proceedings have commenced there will be a danger that the unsuccessful party will have to pay their opponent’s legal bill in accordance with the normal rules of litigation. To avoid this, at the start of a claim the injured party’s lawyer can obtain insurance to protect them from this possibility. If this is sorted out, the insurance company will pay the opponent’s legal costs if the case is unsuccessful. Under the most common arrangement, the injured party does not incur the expense of the premium for this policy (called an After The Event Insurance policy or ATEI) as if they are successful, the premium is paid for by the opponent. If they are unsuccessful the insurance company simply waives the fee.

The most commonly encountered arrangement for injured people to hire a lawyer therefore does not involve any reduction in their compensation and ensures that the compensation they need to make up for loss of earnings, medical expenses and so forth is not reduced by the necessity of having to make a claim. Whilst there are exceptions to this general principle this is the normal approach taken to ensure the injured person can get as much help as possible in recovering from their ordeal.

This is the situation at present but the government, in the person of the Justice Secretary Ken Clarke, recently announced changes to this system which are likely to be very serious for injured people (or claimants) in the future. This announcement follows proposals for reform put forward by Lord Justice Jackson.

The most important point is that the government is set to abolish the principle that success fees can be claimed from the losing party, that is the person or organization that injured the claimant. Instead the government expects success fees to be paid from the compensation paid to the claimant.

In addition, the government will introduce legislation to stop claimant’s being able to claim the ATEI premium from the losing side on a successful claim. With the exception of limited aspects of clinical negligence claims this effectively seems to mean the end of obtaining ATEI insurance if the premiums are not recoverable.

It seems likely that in practise these reforms will lead to wide scale deductions from claimant’s compensation. No longer will injured people have the assurance that their compensation is effectively safeguarded. In some cases the results are likely to be devastating. To have your compensation reduced could be a serious threat to an injured person’s well being and ability to look after themselves and perhaps their family into the long term.

It is likely that these reforms will simply deter a number of people from making a claim where they have a legitimate and proper need to do so. Think of people who have been seriously injured, through no fault of their own, at work for instance. A slip shod, careless employer, interested only in their own profit, subjecting its workers to dangerous practises can feel happy about the reforms being bought in by the government.

Another implication is that the amount of a success fee in monetary terms under the new system will relate to how much work has been carried out on the case. Generally this will mean that the longer a case has been running, the higher the deduction from the injured party’s compensation will be. The difficulty here is that often with a case, the full extent of the injuries and the full measure of all the losses (such as lost wages) they have incurred will only become apparent over time and with a lot of work investigating all the relevant points.

As a result there will be a conflict between investigating the case properly to ensure all the implications of the accident (both in terms of the injuries involved and the losses incurred) are examined sufficiently on the one hand and ensuring the costs involved do not lead to a disproportionately too high reduction in the overall compensation.

Other reforms include a rule that the amount of legal costs on a case must not exceed the compensation that the claimant recovers. This rule might seem sensible but the reality is that sometimes cases can require a great deal of work to be successful, especially when the opposing party unreasonably denies liability. The net effect will be rough justice being done to settle a case earlier than would happen otherwise.

I have seen some reports that predict the overall effect of these reforms will lead to as much as a 60% deduction in compensation for injured people. That is effectively more than a halving of compensation due too injured people who have been put through pain and suffering through no fault of their own. This means, for example, if you are off work and cannot earn money due to an accident you will only receive about half of your lost wages.

Another report I have seen suggests that with catastrophic injury cases, that is very serious injuries that are life changing, the claimants are likely to lose sums of around £40,000 from their compensation. In very big cases like this every penny of compensation is vital as it is needed to help the injured party look after themselves for the rest of their lives when their ability to earn an income has been completely taken away.

Clearly these figures can only be a very rough estimate at this stage but it seems widely agreed that the reforms will be very serious for injured people.

Ken Clarke has welcomed these reforms, apparently taking the view that they are a good thing.

How has this happened? A concerted attack on working people’s right to compensation by the insurance industry. An insurance industry that has, by and large, not suffered during the recent global financial crisis. An insurance industry that has protested to government that it does not need new regulation like the banking sector because it has weathered the recent financial storms and done very well. An insurance industry that spends time and money on hiding how much money it makes to avoid having to pay more tax.

This is the industry that has seduced governments, both Labour and Conservative, into these reforms. This is the industry that seeks to attack the rights of working people, sometimes in low paid jobs with families to support. If anyone hadn’t noticed, our communities are really suffering at present with job cuts, pay freezes and unemployment at its highest since the recession of the early nineties. But the insurance industry and its representatives have decided to make them suffer even more when misfortune strikes and attack justice for people who are injured.

Just like the effective abolishing of legal aid for practical purposes, these reforms of the civil litigation system will probably be implemented without any public fanfare, without any real recognition of the terrible damage they will do to so many lives.


  1. Thi is one more argument, when the state provided legal aid im sure they provided legal advice. It seems that the 'scrapping' of legal aid included free legal advice. The general public are still clueless of wether or not they are entitled to any type of compensation if they have been the victim of a accident. Using a west london solicitor would stop that being the case as they can provide expert legal advice for you the client to ensure you get tall the compensation you deserve and also know your legal rights for the matter you are pursuing.

  2. Thanks for great information you write it very clean. I am very lucky to get this tips from you

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