My last blog in this series dealt with changes with regard to the recovery of premiums for after the event insurance.
Under the new rules, coming into force in April, the premium for after the event insurance will no longer be recoverable from the other side and therefore if a policy is taken out the cost will have to be paid by the client out of their damages.
There are some further changes that will have an effect on the whole issue of insuring cases where the client does not already have legal expenses insurance.
At the moment, putting it simply, in a personal injury claim the losing party pays the costs of the winning party. Most personal injury claims are successful so the other side pay the client’s legal costs.
If court proceedings are issued and a claim proceeds through litigation then the other side will also have legal costs. At the moment, if the client loses they are responsible for paying the other side’s costs.
It is the client’s potential liability for the other side’s costs that is the main reason for taking out an after the event insurance policy. In the event that the client’s claim is lost in the course of litigation the insurance policy pays the other side’s costs thus protecting the client from this liability.
The change that is coming in is called “qualified one way costs shifting”. This means that provided the case that was brought was legitimate, but fails in the course of litigation, the claimant will not have to pay the defendant’s costs.
The liability for the defendant to pay the costs of a successful claimant will remain the same, so where a client’s claim is successful, they will still have their legal costs paid by the other side.
It would appear that on the face of it “qualified one way costs shifting” gets rid of the need for insurance as the client’s liability to pay the other side’s costs in an unsuccessful claim would no longer exist.
Unfortunately, the situation is not that simple due to what are called Part 36 offers. Either side can make a Part 36 offer but for the purposes of this blog we are concerned with a Part 36 offer made by the defendant.
The easiest way to understand the effect of a Part 36 offer is by example. Let’s say that the other side have accepted liability and they make a Part 36 offer of £2,000 to settle the claim.
Having valued the claim we advise the client that it is worth £3,000 and the client therefore rejects the Part 36 offer of £2,000. It proves impossible to agree a more reasonable settlement figure with the other side so the case is litigated and goes all the way to a trial.
At trial the judge (who does not know the amount of the Part 36 offer) awards the client £1,900 which under the current rules would mean that the client would then be responsible for the other side’s costs from the date of the Part 36 offer up to the end of the trial.
Under the new rules the above example would be an exception to qualified one way costs shifting so the client would still be liable for the other side’s costs though it is proposed that this be limited to the amount of the damages awarded to the client. In other words in the above example even under the new rules the client would have to pay the entirety of the £1,900 to the other side towards their costs if their costs were more than this figure.
At the moment the client would be covered by a policy of after the event insurance which would pay the other sides costs and the client would receive the £1,900 that they were awarded. It would seem therefore that even under the new regime there is a place for after the event insurance though the cost of the policy would have to be borne by the client out of their damages.
It would be very risky indeed to pursue a claim into litigation where the other side had made a Part 36 offer without the protection of after the event insurance. Obviously where the client has the benefit of legal expenses insurance as part of their motor insurance or house contents insurance then they will be protected without having to pay a premium for after the event insurance.
The companies who provide after the event insurance will no doubt be looking at the changes and will create policies that reflect the change in the risk which hopefully will be cheaper than the cost of current policies.
I suspect that the reality will be that a lot more cases will settle by the client accepting a Part 36 offer rather than incur the cost of an after the event insurance policy or run the risk of taking their claim into litigation without the protection of insurance.
The net result is obvious, from April 2012, the defendants will use Part 36 offers much more to drive down the overall amount of damages that they pay to claimants.
Ian Wanstall – Contact me at email@example.com
Wanstalls Solicitors are based in County Durham in the North East of England. We represent clients both locally and nationwide and offer a friendly personalised service. If you would like to discuss any aspect of a personal injury claim, we would be delighted to hear from you.