APIL: Jackson reforms have driven claimant firms out of lower-value work

Falling margins: work becoming unviable

Many claimant law firms have stopped working on lower-value personal injury (PI) cases because they are no longer financially viable, the Association of Personal Injury Lawyers (APIL) has said.

The association has also called for the creation of a working party to settle continuing uncertainties in the post-Jackson conditional fee agreement (CFA) regime.

In its response to the Civil Justice Council’s call for evidence on the first year of the Jackson reforms, APIL said its main concern was around access to justice. Those with complex and riskier cases are being turned away by solicitors, “who advise that their cases are not financially viable to run”.

Equally lower-value cases – abused dementia sufferers, for example – may be told that their cases are disproportionate to pursue.

Damages are falling in real terms, it continued, legal market restructuring is diminishing local geographical access to justice and part 36 has largely neutralised the benefits of qualified one-way costs shifting.

Turning to the impact on the legal market, APIL said firms are under ever-increasing pressure to push down work to the most junior level of fee-earner at a time of increasing complexity of regulation and the CPR, producing “an inherent conflict between a firm’s ability to stay profitable and their desire to provide a quality service”.

Further, the shape of the market is changing, with consolidation, the growth of “caseload farmers” buying work in progress, and firms closing entirely or shutting their PI departments.

And those staying in the PI market are changing the way in which they risk assess cases, it said. “Anecdotally members report that they are budgeting for a 30% drop in work following the reforms with redundancies across the PI sector as firms re-evaluate their business models. However, the full effects of these reforms will not be seen until pre-LASPO cases are settled. It is still early days.

“A recent survey of APIL firms showed that many are pulling out of lower-value claims valued between £1,000 and £10,000 because they are no longer financially viable; 94% indicated they were no longer taking on motor claims valued between £1,000 and £10,000 and 98% indicated they were no longer taking on employers’ liability disease cases.”

The response argued that the referral fee ban had not reduced the cost of firms’ route to market, but that the cap on success fees made it hard “to commercial compensate the risk” of investigative costs and lost cases.

A further concern is the cost of professional indemnity insurance in light of the “Draconian and in some cases inconsistent approach in the way the courts are dealing with breaches of rules and orders”.

APIL said: “The consequences of inadvertent procedural default, requires more resources to be allocated to a given matter than are financially viable. This is likely to result in more solicitors withdrawing from the market, possibly as a result of a rise in professional indemnity insurance premiums across the sector, and for some an inability to secure such insurance.”

APIL said there appeared to be very little evidence of claimants negotiating on the success fee, which Lord Justice Jackson had expected to drive down the percentages taken by solicitors.

It called for greater clarity on whether pre-LASPO CFAs can be assigned to a new firm on a WIP sale or firm acquisition, and on what counsel’s fee will be when there is a valid pre-LASPO CFA between client and solicitor, but the barrister is instructed after 1 April 2013.

APIL said it was also unclear whether the courts would approve a success fee and an ATE policy deduction from damages in cases involving infants or a protected party.

The response said: “A working group should be established to examine these issues as a matter of urgency to ensure clarity and consistency for the profession. The fear is that

There also needed to be greater clarity on issues around damages-based agreement – with uncertainty meaning there has been “very little uptake” – such as the effect of the indemnity principle on the costs recoverable by the solicitor and the enforceability of hybrid agreements.

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