New trend of under-settlement claims affecting personal injury solicitors
We have all long been familiar with the law firms and claims companies who chase business from victims of accidents. We are now experiencing a spin-off trend: claims for under-settlement of those same accident claims. Websites and online advertising aim to attract individuals who have already successfully brought and settled personal injury claims, promising the possibility of an increased recovery from their former solicitors on a no win no fee basis.
Professional indemnity insurers are dealing with an increasing volume of notifications from solicitor insureds relating to such claims. This trend has become known as “cannibalism”.
In our experience these spin-off claims will typically evolve as follows:
- Upon being instructed, the claimant’s representatives will write to the former solicitor requesting a copy of its file. This request will usually include a reference to “a potential professional negligence claim” against the solicitor, but citing no specific details or allegations. We assume that this is a deliberate attempt to ensure that cover under the solicitor’s professional indemnity policy is triggered.
- Following receipt of the file (which is often released without question, on the solicitor’s understanding that their former client is entitled to it in its entirety) the claimant’s representatives will carry out a review in order to find any grounds upon which the solicitor can be criticised for its conduct of the litigation.
- The claimant’s representatives will then insert these criticisms into what appears to be a pro forma Letter of Claim. There is often no mention of causation, and sometimes very minor flaws in the solicitor's conduct of the file are cited as being responsible for a gross under-settlement of the original claim. The letters often purport to be written in accordance with the Professional Negligence Pre-Action Protocol, although in our experience in the majority of cases there are good arguments that they do not comply with its requirements given the lack of detail and failure to address causation or properly set out quantum.
Advertising by these claims companies usually refers to claimants feeling dissatisfied with their original settlement, perhaps because they recovered less money than they feel they deserved or their claim was settled too quickly. However, the advertising is often decidedly vague about the legal basis needed to bring a successful claim, and there is a suspicion that these claims may be purely opportunist, rather than arising out of a genuine sense of grievance on the claimant’s part.
Obviously we are not privy to the legal advice these claims companies give to their clients. We have however identified instances of very cursory file reviews having been conducted or entirely meritless letters of claim being sent. Often the allegations can be countered with documents from the file itself. This tends to suggest that some claims are being advanced with little or no intention of actually issuing proceedings, in the hope that the threat of litigation and adverse costs will persuade the defendant solicitor (and their insurers) to settle on a commercial basis.
In the post-Jackson era it is likely that, in these cases, claimants are entering into Damages Based Agreements (although these agreements do not have to be disclosed to the defendant). This will involve a ‘no win no fee’ arrangement, with the solicitors taking a proportion, typically up to 25%, of the damages paid in addition to costs recovered from the defendant.
The market response
As far as we are aware there is currently no standard approach being adopted by the insurance market, and each individual case must be judged on its merits. Some of these claims may have substance and therefore whilst a complete rebuttal may be appropriate in the majority of cases, where liability appears inevitable there is little benefit to be derived from incurring costs (including potentially significant adverse costs) in protracted litigation.
That said, we consider that there are certain steps which can be taken both to reduce the likelihood of claims materialising, and to help insurers and their insureds manage those that do arise:
- Although in many cases the claimant’s solicitors will provide a mandate for the file, this is not always the case. Where this is not already provided it should be requested.
- Although the original file is the property of the client, certain documents remain the property of the solicitor: for example attendance notes and copies of letters sent to third parties. Insurers may therefore wish to consider asking their insureds to remove such documents prior to the file being disclosed, on the basis that without them it will be far more difficult for the claimant solicitors to formulate a claim.
- That said, filleting the file in this way is time-consuming and may be perceived by claimant solicitors as a sign that a defendant has something to hide. In any event, the majority (if not all) of these documents would need to be provided in response to an application for pre-action disclosure or in the course of Protocol correspondence. Overall, therefore, insurers may take the view that the whole file should simply be disclosed.
- Arguably the duty to release the file does not extend to paying postage or courier charges. You may ask the solicitor to inform the claims company that the file is available for collection from its offices. Should they offer to pay postage however, it would not be reasonable to refuse to post the file.
- The insured’s original retainer letter may also entitle it to charge an “administration fee” for providing the file, so where possible we would suggest that it does so. Although the fee must be reasonable (we would suggest in the order of £50 plus VAT), given the number of file requests being made this may have an overall dissuasive effect.
- Where the file has already been provided or the above steps do not prevent a Letter of Claim, unless the insured’s review of the file reveals any particular concerns regarding the retainer or potential quantum is significant, insurers may wish to make and maintain a complete defence of the claim. Given the low figures generally involved(1) and the risk(2) of proceedings being allocated to the Small Claims Track we think it likely that many of these claims are being advanced with little real intention to issue proceedings. Rather, in many cases the aim appears to be to secure a swift pre-action commercial settlement which relies on insurers’ concerns on adverse costs. Again, however, each case should be assessed on its merits.
Refusing to entertain the idea of settlement is clearly not without risk, but taking a firm line with claimant solicitors rather than looking to settle on a purely commercial basis is likely to have an overall benefit, even if settlement may seem preferable when looking at these matters on a case by case basis.
We are aware that a large number of these claims have already been notified to insurers and that the number will increase. To assist insurers in responding to these notifications we therefore attach to this email a short guide to approaching them. This has been written with a view to providing quick and straightforward guidance to solicitor insureds facing such claims. Insurers may therefore wish to forward this guidance to them as such claims arise.