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Fee Paying Litigation:UK Heading for US Style Litigation?

Until 2001, if you had been injured in a road traffic accident (RTA) you simply made arrangements with a Solicitor to obtain compensation on your behalf. The question of costs was very rarely mentioned as it was an unspoken truth that the Solicitors expected to recover their costs in full from the negligent driver's insurance company.



When Lord Woolf reformed the framework surrounding compensation claims in 2001, the system of No Win No Fee (NWNF) was introduced, which in theory allowed claimants to bring claims without the fear of accumulating large legal costs bills if they lost the claim, thus providing access to justice to individuals who previously may have been put off from claiming.

This access to justice was protected by the issuing of what was known as After the Event Insurance (ATE), an insurance policy that guaranteed that the legal costs would be paid in the event of the claim not succeeding.

In legal circles this type of arrangement is governed by a Conditional Fee Agreement (CFA) which in layman's terms basically means, that the lawyer agrees to take the clients case on, work for free for the duration of the claim, irrespective of the length of the case, before ultimately getting paid their costs on a fixed fee regime, with the possibility of achieving a success fee, if indeed the claim succeeded (therefore the fees are paid conditional upon success in the case!).

Quite where this system of accessing legal services and obtaining compensation came from is a bit of a mystery now, although at the time it probably made some sense. In any event the system was introduced and has been utilised since then, albeit utilised in what can only be described as a battlefield, as claimant lawyers and insurance lawyers have knocked lumps out of each other arguing as to the rights and wrongs of the system.

This battle has raged for 10 years and has now led to a further change in the legal framework surrounding these claims, from Conditional Fee Agreements (CFA's) to Contingency Fee Agreements (COFA's).

In the newly proposed regime, the claimant will now have to commit to giving his lawyer a percentage of his recovered compensation to contribute towards the lawyers costs in the event of a successful claim.

So if  £32,000 is recovered on a 20% COFA, the lawyer will deduct £6,400 from the compensation award to contribute towards their costs of acting for the client. This process is widely used throughout the United States and has been for very many years.

It is a much simpler process for all parties concerned and one which the claimant will understand completely from day one, as opposed to the impossible task of trying to explain the ins and outs of a CFA.

Indeed in many cases, a significantly large percentage of claimants already expect that there will be a deduction from their compensation award, even though to do so has been un-legal for the past 10 years.

In creating this new framework Lord Justice Jackson has necessarily had to make some collateral changes such as scrapping the indemnity principle and introducing 1 party cost shifting, which in effect maintains the claimants ability to bring a claim without risk of costs, but crucially negates the need for ATE Insurance to be in place and thus provides a much needed costs saving to the ultimate paying party (the insurance company).

No doubt the media will scare up some headlines and roll out the usual extreme and absurd scare stories about daft claims being made, but the fact is that this new regime proposed by Jackson should make life simpler for all stakeholders.

The claimant will understand his legal obligations when making a claim.
The claimant's lawyer will understand what they will be paid if successful (or not).
The insurance company have had a welcome shot in the arm from the loss of paying ATE premiums.
And the whole process in these low value RTA claims should be speeded up considerably.

So in answer to the headline question...yes the UK is going down the US route in RTA litigation and what a welcome relief that is for many!

 

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