Is clinical negligence the way for PI firms to go post-Jackson?

Holland: cash-hungry investing area with a long-term turnaround

Posted by Zoe Holland, managing director of Litigation Futures sponsor Zebra Legal Consulting

In response to the post 1 April 2013 world, the personal injury sector has seen a surge in the number of law firms looking to clinical negligence as a new area of work.

Since the beginning of the year, enquiries about setting up or expanding clinical negligence departments have seen a tenfold increase. From a survey we carried out via contacts in the market, this trend has also been noted by key industry stakeholders such as banks, medical agencies and insurers.

A specialised area of work

Firms need to understand the specialism required to manage this work, not only in terms of case management, but also in financial management.

Understanding the risk profile of clinical negligence is critical to cash flow and profitability. In the post Jackson era, managing and monitoring this work effectively will be critical to a law firm’s ability to generate cash and profit.

As this work can have a three-year lead in, the firm may not feel the real pain of its lack of expertise until year three or four. By this time WIP and disbursement write- offs can be significant. Having worked on two recent projects in firms where this has been a learning curve, other firms need to think carefully before embarking on setting up clinical negligence departments without fully assessing the resource, funding and staff requirements.

Risk assessment

Assessing risk from the start of a clinical negligence case is critical. This is where new entrants into the market may find that they have a skill gap. Risk assessing comes with experience in litigating these cases, and is not a skill that can easily be transferred.

The temptation of some firms is to consider placing their experienced personal injury solicitors into the role of clinical negligence risk assessor. Unless the assessor has significant experience in this field, or has a medical background, this scenario is set to fail.

Financial risk profiling

Given the nature of clinical negligence litigation, firms may carry caseloads with a very small percentage of admissions. Unlike personal injury work, this can make it difficult to assess ‘safe’ work in progress. It is critical therefore to risk profile the caseload as it progresses. This can involve having an overview or case prospects, case complexity and quantum.

For new firms entering the market, it will be critical for any financial modelling/forecasting, for the firm to understand the key indicators of case value and risk. Further, they will need to have a basic overview of a caseload settlement profile.

Seeing it through

If firms view clinical negligence as a way to generate cash quickly, then they are in for a financial shock.

It is a cash-hungry investing area with a long-term turnaround. They must be prepared to play the ‘waiting game’.