26 January 2010

One-way cost shifting and the abolition of ATE insurance and Success Fee will have a negative impact on Access to Justice and will see a huge influx of spurious claims, specialist legal expenses provider ARAG has warned.

Paul Hurley, business development and marketing director said: “The ‘have a go’ claim culture will increase substantially under the proposed change to one-way cost shifting because the client has nothing to lose. Liability insurers will be inundated with claims and this will have a detrimental effect on the timescales contained within the MOJ Reforms due to be implemented in April.”

Hurley also expressed disappointment that that LJ Jackson failed to fully engage with ATE providers. “The report cites meetings with solicitors, judges and the NHSLA but the LEI market, which stepped into the breach when Legal Aid was withdrawn, has been cast aside as an unnecessary expense. There is no mention in the report of solicitors and ATE providers joining forces to provide a funding solution where disbursements and time have been incurred, only for the case to be dropped due to unreasonable prospects. These are costs liability insurers never see but for claimant solicitors and ATE providers this is providing true access to justice for those who cannot afford to fund a claim from the outset.”

The report provides a history of pre and post Wolff reforms but fails to mention the issues of ATE providers post Wolff. Hurley added: “When legal aid was withdrawn insurers picked up the baton and ran with it. Unfortunately, due to the lack of claims history many incurred substantial losses and either went out of business or withdrew from the ATE market. Compared with 10 years ago, there are now only a handful of underwriters prepared to underwrite these risks. The assertion that ATE insurance adds considerably to the cost of litigation shows a lack of understanding of the LEI market.” He further suggested that the panel of assessors that assisted throughout the costs review should have included members from the LEI market to provide a balanced view on this matter.

On the issue of extending BTE insurance, although in general agreement, ARAG has some concerns. “We endorse the view that BTE is a good option for many clients but, if referral fees are abolished, then LEI providers will receive less income and this will have a knock on effect to the net premium charged to brokers. This in turn will see an increase in the gross premium, which will result in fewer people purchasing BTE cover,” warned Hurley. 

Hurley is concerned at the “unfair and negative comments” made regarding claim management companies. “It would be fair to say that in the past a number of CMCs tarnished the spirit of Access to Justice but, since the MOJ took control of the situation and implemented regulation, the market is now at a level where consumers have confidence in dealing with such organisations and the service they provide.”

See the ARAG Blog for further discussion