Changes being introduced in April 2013 are set to shake up how personal injury cases are funded, which will result in victims of accidents having to use some of their compensation to pay for their claims.
At present, most personal injury claims are funded by way of a ‘No Win No Fee Agreement’ with the successful claimants’ legal costs being paid by the defendants’ insurers, enabling claimants to keep 100% of the compensation awarded to them. This system works well for claimants; however insurers complain of a rise in the number of claims, the rising costs of claims and that too many bogus claims are now being pursued.
Further to recommendations of Lord Justice Jackson, and with constant pressure from insurers, the Legal Aid, Sentencing and Punishment of Offenders Act 2012 is due to come into effect on the 1st April 2013.
The main area of change will be that the lawyer’s success fee (part of the No-Win No-Fee agreement) and the after-the-event insurance policy premium will no longer be recoverable from the unsuccessful defendant – the accident victim must pay for these costs from their damages! In return there will be a 10% increase in general damages (the amount awarded for pain and suffering) and the success fee will be capped at 25% of general damages and past losses (not future care and loss). Whilst this may sound like a fair trade-off, in reality the 10% increase in damages is unlikely to make a real difference to the final settlement figure, the result being that claimants will lose out. According to Lord Justice Jackson’s figures, nearly 40% of claimants will be worse off!
I think I can speak for most experienced personal injury lawyers to say that we are extremely unhappy that claimants are now being forced to use some of their damages towards their legal costs. The Law Society has commented “We believe the proposals will reduce access to justice, increase costs to business and result in a windfall for insurers. Many claimants will lose a substantial proportion of their damages under the plans and solicitors may not be in a position to take on higher risk or lower value claims”.
I have been a member of the Association of Personal Injury Lawyers for 20 years and we are proud to support legal reform where it produces efficiencies in process and delivers the appropriate level of compensation to the injured person – sadly, the changes to be introduced in April 2013 do not appear to achieve either.