This piece first appeared in Saga Magazine in October 2001
The text here may not be identical to the published text

Suing for Compensation


No win, no fee

Your car is hit by another giving you a neck injury. You fall in a shop and cut your leg. An accident at work leaves you ill for months. A train door slams on your hand. You ask for compensation but the other side refuses to pay or offers a derisory amount. You want to sue. But can you afford it?

A recent ruling by the Court of Appeal means that the answer is almost certainly ‘yes’. New rules laid down by the Court in July should make suing for compensation cost free and risk free in almost all cases, as long as you go about it in the right way.

No Win - No Fee

In April 2000, the Government scrapped legal aid for people who were suing for personal injury. Instead, all solicitors who took personal injury clients had to work on a ‘no win, no fee’ basis. In other words, your lawyer only gets paid if you win your case. If you lose, the lawyer gets nothing. It sounds simple. But it has taken eighteen months for the various legal issues to be sorted out.

The first problem was what to do about the costs of the other side. It is a basic principle in English and Scots law that the loser pays the legal costs of the winner. So if you lose, even though your lawyer has agreed to charge nothing, you may still be stuck with the costs of the other side – and that could be a very great deal of money if the case is defended by an insurance company.

The first answer was to make everyone insure themselves against the costs of losing so the most they could lose would be the cost of the insurance premium. But that could be anything from a hundred pounds or so to a few thousand depending on the case. So many people could still not afford to risk losing and paying the premium. Even if they won, the cost would come out of their compensation, cutting the value of what the courts awarded.

Both those problems have now been solved. If you lose, the insurance industry has come up with a new product which is really two insurance policies. First, you pay a premium to insure against having to pay the others side’s costs. And then you pay a smaller premium to insure yourself against having to pay the bigger premium. In practice, the best policies wrap the whole thing up in one premium. If you lose, the insurer pays the costs of the other side and your premium in full. So you do not pay either the other side’s costs or the premium for insuring yourself against paying them.

If you win, there were doubts about whether the losing side would always pay the insurance premium. Defendants argued that no insurance was necessary until they had decided to contest the case. So taking out a policy right at the start was an unnecessary expense that they should not have to bear. The Court of Appeal disagreed and decided that the losing side should pay the premium for insurance even if it was taken out when you first saw a lawyer. That means it does not have to come out of your compensation. However, the Court said it would only approve ‘a reasonable premium’. Guidelines have now been issued about what is reasonable and a good lawyer should always make sure the insurance recommended is covered by the guidance.

So, following the Court of Appeal judgement, win or lose, you do not pay for the reasonable cost of insuring yourself against losing.

Disbursements

Although your lawyer will not charge you if you lose, other people on your side will. There will be medical evidence – such as examination by a doctor, x-rays, and professional opinions. There may also be factual evidence about dangers and what an organisation has done to reduce them or point them. Evidence can be expensive to gather, and may involve the cost of paying expert witnesses to appear in court. Many barristers now work on a no win, no fee basis. But if your does not, they will have to be paid.

The costs of all these things are called ‘disbursements’ and can be considerable. If you win, the other side will normally pay all these costs, as long as they are reasonable. And your insurance policy should cover them if you lose. However, they still have to be paid for during the course of the proceedings. Some lawyers will bear this cost for you, others may ask you to take out a loan to pay them and the insurance premium. If so, make sure you are happy with the terms. And remember that if you win, you may end up paying the interest on that loan out of your damages.

Success fee

There was another problem which the Court also had to resolve. Your lawyer is taking a risk – he or she will only get paid if your case is won. If it is lost, for whatever reason, then the lawyer gets nothing for all the work that has been done. The solution agreed by the Law Society, which represents solicitors, is that the lawyer should get an extra ‘success fee’ – formally called ‘an uplift’ – not so much as a reward for winning but as compensation for the cases where the lawyer loses and gets paid nothing. Under the Law Society rules this uplift can be as much as 100% of the normal fee, but in straightforward cases where there is little chance of losing, it will be much less – 20% or lower in some cases. It sounds fair for the lawyer. But is it right that the losing side should pay this enhanced fee? The insurers argued that they were happy to pay the normal fees of the lawyers, but why should they subsidise the higher fees which compensated lawyers for losing other cases?

That matter too was decided by the Court of Appeal in July. It held that in straightforward cases of compensation following traffic accidents, an uplift of 20% was reasonable and should be paid by the losing side. In other cases, a higher uplift might be fair and it would be up to the courts to decide in each case what can be charged.

So if you lose your lawyer is not paid. And if you win, the other side pays all your legal costs including the higher ‘success fee’ charged by your lawyer.

These rules mean that you can now sue safe in the knowledge that if you lose you pay nothing and if you win you will normally keep the full amount of the compensation awarded by the courts. It all sounds too good to be true. Victims get paid, lawyers work for nothing, justice is done. But there are dangers to avoid.

Risks

Many of these rules do not apply to the claims management companies which advertise so widely on television and in hospitals encouraging people to go to court for compensation after an accident. These companies are unregulated and can charge their customers anything they like. The result is that many people who use a claims management company to pursue their case find that they have to pay the company’s fees and charges out of the compensation awarded by the courts. Even if they lose, there may be bills to pay.

These companies employ ‘claims managers’ who deal directly with the client and find them a lawyer. You may be charged for the manager’s time and find it difficult to talk directly to the lawyer who is dealing with your case. You may also be charged for insurance and for borrowing money to pay for expenses while the case is going on.

Some of these claims management companies are better than others. But the safest thing to do if you have had an injury or illness that you believe was caused by something which someone else did or failed to do, is to contact a personal injury lawyer directly and cut out the unnecessary and sometimes expensive claims management company. You can get a list of local lawyers from the Association of Personal Injury Lawyers (APIL) information line on 0115 938 8711. You should also check the lawyer is either on the Law Society’s personal injury panel or that they have a qualification from APIL – they range from Associate at the lower end to Senior Fellow at the upper end. You should also check that your lawyer is a specialist in the kind of injury or accident you have.

Of course, someone has to pay for all this. If we all sue every time something unfortunate happens to us, the compensation money has to come from somewhere. Normally, of course, it is an insurance company that pays. Their income comes from the premiums paid for the policies taken out by businesses and motorists to insure themselves against claims for injury and accident. So if more people sue successfully, then premiums will rise. That cost will fall directly onto motorists and it will be paid indirectly by all of us as businesses and shops put up their charges to cover the extra costs. But that is the price we will all have to pay for ensuring that justice is done for the victims of accidents.

October 2001


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