| Copyright (c) 2010 Evolution Legal | | | | unless he was telling lies all along. |
| Introduction | | | | However this regime has been extremely unpopular |
| In November 2009 Lord Jackson published his | | | | with Insurance companies as they are left to foot |
| recommendations for the future of small value RTA | | | | the entire bill for what are in the main low value |
| claims and the referral system that has been | | | | compensation claims. They have been lobbying to |
| developed around the market over the last 25 years. | | | | have the regime changed almost since 2001 and now |
| The implications of the report are far reaching and in | | | | with the Jackson report they have succeeded to |
| affect the operations of all claims management | | | | some greater or lesser degree. |
| companies. | | | | The recommendations of the Jackson Report (as |
| History | | | | pertinent to this market) |
| Upto 2001 the market in small value RTA claims was | | | | Lord Justice Jackson has made the following |
| diverse and unregulated. Ultimate referral sources | | | | recommendations for the market: |
| could refer claims to accident management | | | | Ending the "indemnity principle" - Leading to the |
| companies or Solicitors (or both) and there was no | | | | scrapping of ATE Insurance - Which in itself leads to |
| hard or fast rules as to legal protection for the | | | | the scrapping of CFA's - Bringing about the use of |
| claimant. | | | | Contingency Fee Agreements (COFA's) - The |
| Some Solicitors used the then little known system of | | | | implementation of "1 party cost shifting" - The |
| After the Event (ATE) Insurance, some relied upon | | | | banning of referral fees - An uplift on damages by |
| Before the Event (BTE) insurance and some relied | | | | 10% |
| upon their own risk assessment procedures without | | | | By scrapping the indemnity principle, Lord Jackson is |
| putting claimants on any kind of legal protections | | | | making the relationship between the claimant and the |
| cheme. | | | | Solicitor private, meaning that legal costs no longer |
| It should be noted that at this time the paying of | | | | form part of the compensation claim but are a |
| referral fees by Solicitors to any referral source was | | | | separate item recoverable between the Solicitor and |
| banned by the Law Society, although the rule was | | | | the Insurance Company. |
| flagrantly ignored by all and sundry. | | | | By scrapping the Indemnity principle and bringing in |
| The Woolf Reforms 2001 | | | | the "1 party cost shifting" regime, Lord Justice |
| In 2001 Lord Woolf dissected the entire process and | | | | Jackson is releasing the claimant from the risk of |
| created the Access to Justice Act which effectively | | | | losing the claim and facing a cost bill from the |
| brought about the process known as "No Win No | | | | Insurance Company. |
| Fee" (NWNF) a much maligned, misunderstood and | | | | Even if the Insurance Company successfully fights |
| abused process. | | | | the claimant's case, they will not be able to recover |
| Within the NWNF regime it was decreed that on the | | | | costs, thus freeing the claimant from the risk of |
| basis that a claimant was an innocent victim, access | | | | costs and ending the need for an ATE Insurance |
| to justice should be free. The claimant should not | | | | policy. |
| have to pay anything to obtain compensation for | | | | It also has the effect of bringing in American style |
| injuries he sustained at the hands of another person | | | | Contingency Fee Agreements, whereby the Solicitor |
| or company. | | | | will still act for the claimant for free until the end of |
| All of this was subject to the indemnity principle | | | | the case, but at that point will be entitled to a |
| whereby a claimant can only recover losses that he | | | | percentage of recovered damages, the percentage |
| has sustained as the result of the accident, i.e | | | | charged being based upon the risk of success. |
| damaged car, replacement car, injuries and legal | | | | This effectively ends the NWNF regime. |
| costs. If the claimant is not responsible for legal costs | | | | So now in the new regime, if a claimant makes a |
| then the negligent driver is not responsible for them | | | | claim for compensation: |
| either. | | | | The claimant enters into a COFA with the Solicitor |
| Solicitors could enter into Conditional Fee Agreements | | | | and agrees a success percentage. - There is no need |
| (CFA) with a claimant, supported by ATE Insurance | | | | for any Insurance policy - The Solicitor works for |
| that ensured that if a client made a claim for | | | | free until the successful conclusion of the claim. |
| compensation: | | | | If the claim succeeds: |
| The Solicitor would carry out all work for the client | | | | The claimant will relinquish an agreed percentage of |
| without charging, irrespective of how long the claim | | | | his recovered damages to the Solicitor - The Solicitor |
| took to settle - The Solicitor would put in place an | | | | will separately recover costs on a sliding scale from |
| ATE policy for the client - So long as the claimant | | | | the Insurance company (much reduced from previous |
| gave all required assistance he could never be | | | | costs regime). |
| responsible for costs irrespective of whether he won | | | | If the claim fails: |
| or lost the claim. | | | | The client receives £zero compensation - The |
| If the claim succeeded: | | | | Solicitor does not recover any percentage from the |
| The claimant would receive 100% of the | | | | client nor recovers the costs from the Insurance |
| compensation award. - The Solicitor could recover a | | | | Company. - The Insurance Company will not seek to |
| fixed fee for costs of £1200 plus claim a success | | | | recover costs from the client. |
| fee of upto 20% of the £1200 costs award. - | | | | Ultimately, this regime releases a significant costs |
| Recover the premium for the ATE fee. - All of these | | | | burden from the Insurance Company. |
| costs were payable by the negligent driver's | | | | If LJ Jackson's proposals regarding the banning of |
| insurance company. | | | | referral fees is implemented, Solicitors can not legally |
| If the claim failed | | | | pay referral fees to any sources, be it Claims |
| The claimant received nothing in compensation. - The | | | | Management Companies and / or Insurance Brokers. |
| Solicitor recovered his costs from the ATE policy | | | | This will have a significant effect on the market |
| (but no success fee), along with the premium for the | | | | generally. |
| policy itself. - The policy would pay for the othersides | | | | If the banning idea does not come into effect, |
| costs. | | | | referral fees generally will be reduced for the entire |
| Hence the term NWNF. If the client wins there are | | | | marketplace, simply because recovered costs, which |
| no fees to pay, but the regime should have been | | | | presently are the basis for all referral payments, will |
| called No Win No Fee, Loss No Fee because the | | | | be much reduced and this will have a ripple effect |
| claimant was never going to pay anything, ever, | | | | across the entire market. |