Posted by David Pipkin, director of underwriting, and Jacob White, an underwriter, at Litigation Futures Associate Temple Legal Protection
Richard Beaty, a barrister at Hailsham Chambers, wrote recently about the growing perception amongst indemnity insurers and professional clients that the under-settlement of injury claims is on the rise.
This is a trend that our commercial underwriting team has noticed in the cases being sent in by professional negligence practitioners.
Many of these cases have historically been based on the failure of the solicitor handling the personal injury claim to issue proceedings in time. But, increasingly, the allegation is that a case has been settled at a substantial undervalue.
Why is this?
More work is required on these cases, but there is now less time for senior practitioners to do it.
Claimant personal injury lawyers had to adapt to the Coalition government’s LASPO reforms. One of the consequences has been that firms are under pressure to increase their work in progress, as they will not benefit from substantial profit costs from clients’ success fees, previously recoverable from the unsuccessful party.
The removal of civil liability for breach of statutory duty has also increased the amount of work required to fully investigate and plead these cases; it is no longer a cause of action in its own right and a breach must be used to show negligence at common law.
Firms may therefore be taking on a higher level of work than they had done previously, to off-set concerns about a reduction in firm’s profit, with the potential result being that individual clients receive less contact time with their solicitor. Where previously senior associates or partners had been integral to risk assessment, case management and assessment of quantum, much of this work may now be done by more junior lawyers or paralegals.
The net result is that clients are more likely to have their cases valued incorrectly.
Quantifying the claim – how it goes wrong
The Judicial College Guidelines provide an indication of what a claimant may receive for the type of injury they have sustained. The guidelines are not law. They do not provide a necessarily useful indication of how to approach valuing a case where a client has sustained multiple injuries. They are worthless without supporting case law. If used incorrectly, they are of no use to a claimant.
The individual carrying out the quantum assessment must also ensure that all the client’s injuries have been taken into account. Pressure to open more files to increase work in progress increases the likelihood of an injury being missed. The correct type of report from a medical professional must be obtained – if a claimant has had a fall and the medical report highlights the need for a report from a consultant neurologist, has this been flagged up as absolutely necessary?
There is also the importance of considering the Smith v Manchester and Morris v Johnson Matthey principles. Will the injury weaken the claimant’s position in the job market? Will the injury prevent the claimant from continuing to work in his given trade, resulting in ‘humdrum work’?
If the injury will prevent the claimant from working indefinitely, it is of paramount importance that the Ogden tables are used correctly in identifying future loss.
Apart from causing the under-settlement, the failure to assess quantum accurately also puts the claimant at risk under qualified one-way costs shifting (QOCS). A claimant is not just at risk of receiving substantially less than what they are due, but also at risk of paying the defendant’s costs.
Brave claimants – the importance of getting the second claim right
A claimant suing a personal injury solicitor for undervaluing their claim has the right to be sceptical. They have (probably) instructed a solicitor for the first time. They have been let down. They still require compensation.
There will be two immediate questions for them to answer: How will they find appropriate legal representation to sue their solicitor? How will their second claim be funded?
Who is an appropriate lawyer? Logic might dictate the obvious choice is an experienced personal or medical injury lawyer, but from an underwriter’s perspective that may not be the best course. We do on occasion see cases from such lawyers where the assessment of the prospects of success are overconfident and do not fully assess causation.
The best-prepared cases come from lawyers who have built up experience in handling a range of professional negligence work. These are the case we are more likely to insure.
It is probable that in the personal injury claim the claimant was able to find a lawyer who would act under a conditional fee agreement (CFA). The client is likely to have also had litigation/after-the-event (ATE) insurance. As QOCS will not apply to costs in the professional negligence claim, it is of paramount importance that the client is aware of the costs risk.
Some practitioners will be able to offer a CFA and litigation/ATE insurance arrangement to a professional negligence claimant.
Jonathan Sachs, a partner at Irwin Mitchell and member of the Professional Negligence Lawyers Association, says: “There is nothing straightforward about a personal injury or a clinical negligence claim. The same applies to a professional negligence claim for lost chance or under-settlement. A good team requires both of these specialists working together and an ATE insurance policy which covers and possibly funds substantial disbursements.”