In a previous blog I looked at the changes in relation to the recoverability of the success fee in a conditional fee agreement (no win no fee agreement). This blog looks at how the new changes that come into legislation in April 2013 will affect how personal injury claims are funded now and in the future. The blog post is quite complicated so if you have any questions, please do give me a call. By claiming through Wanstalls rather than your insurance company we can explain all of this to you and advise you on the best personal course of action for you.
Conditional Fee Agreements – The current “No win, No Fee” Arrangements
Currently, a conditional fee agreement (CFA) protects the client from having to pay their own solicitors costs in the event of their claim being unsuccessful. For this reason CFA’s are best known by the public as “no win no fee” agreements.
No Win, No Fee agreements cover the claimants costs but what it doesn’t cover is the other parties costs if the claim is unsuccessful. This in most cases is not important as most personal injury cases are dealt with by the insurance company and therefore there are no external costs.
However, if court proceedings have been issued and served then the other party will have costs that need to be covered. The sums involved could be very considerable if the case has gone all the way to a trial and then been lost.
The other thing that a CFA does not protect against are the client’s own disbursements. Disbursements are payments that a solicitor makes to other parties on behalf of their client and will include such things as medical report fees, barristers fees and court fees. In an unsuccessful claim the client could be responsible for paying the disbursements which cannot be recovered from the other side.
After the event Insurance Policy – Client Peace of Mind
To protect the client from the risk of having to pay the other sides costs and their own disbursement there are insurance products available. These policies are called after the event insurance (ATE) policies and are taken out by your solicitor to ensure the claim does not cost the claimant should they win or lose.
ATE insurance policies are carefully designed so that the client does not have to pay the premium and with most ATE policies the premium does not have to be paid till the end of the case.
At the moment if the case is successful then the other side has to pay the premium for the ATE policy as part of the costs recovered from them.
If the claim is unsuccessful and it is necessary to claim on the policy to recover either the client’s disbursements or the other side’s costs then most ATE policies also cover the premium. In other words in an unsuccessful personal injury case the policy also covers the premium so that the client even in an unsuccessful case does not have to pay the premium.
The policies can operate this way as ATE insurance is generally taken out at the beginning of the case when the conditional fee agreement is first signed. As the majority of personal injury claims are successful most premiums are recovered from the other side. This enables the insurers to take the risk of having to cover the premiums in unsuccessful cases.
The key to the whole system of ATE insurance is the fact that the other side has to pay the premium in successful cases. It is this that is due to change with the legislation that comes into effect in April 2013.
How is this going to change in April 2013?
When the legislation comes into effect the other side will no longer be required to pay the ATE insurance premium even in a successful case. This will mean that if a clients CFA is to be protected by insurance then the client will be responsible for the premium. The cost of ATE premiums can be considerable ranging from a few hundred pounds to several thousand depending on the type of claim to be insured.
It is likely that the insurers who provide ATE insurance will have to look at their products and it may well be that cheaper premiums will become available. However, the cost of ATE insurance will undoubtedly be a cost that a client will have to pay.
If the ATE premium is not payable till the end of the case and only payable in successful cases the client may have to pay the premium out of their damages which might make a significant dent in what they receive.
This is one of the changes in the law relating to personal injury claims that will potentially bring an end to the current situation where most claims are pursued at no risk of cost to the client where the client receives their damages in full.
There are other changes that impact on the area of ATE insurance but I will deal with these in a subsequent blog as they are complex and will require yet another lengthy blog.