The failure of personal injury law firms to get to grips with some of the basics of what they do is fuelling the growth of ‘cannibal’ law firms that encourage clients to sue their former solicitors for under-settlements and other errors, specialist consulting law firm Citadel Law has warned.
With the fall-out from LASPO still raw – and possibly going to get worse in the next year as firms run out of more remunerative pre-April 2013 cases – Citadel said it feared a new wave of problems could come from “a worrying cohort of firms that put profit before client care”.
Managing director Lesley Graves said that though a good number of firms are adopting a “‘back to basics’ approach by finding ways to operate profitability without putting clients at risk”, still too many firms are focused on making “a quick buck, with little thought to the claimant”.
As a result, an increasing number of law firms are advertising for dissatisfied clients who want to take action against their original solicitors.
Ms Graves said her experience of working with 200 PI firms in the last two years highlighted inadequate time recording, poorly drafted bills of costs and cash collection and a lack of litigation expertise.
She added that some other trends were developing, including a lack of understanding of noise-induced hearing loss (NIHL) cases.
“It is not the pot of gold at the end of the rainbow,” she said. “This type of work is far from easy money and an extremely risky area to invest in without real expertise and experience. A fundamental understanding of the WIP and capital lock-up cycle, plus the expertise required to make this work profitable is essential to mitigate professional negligence risk.”
Other problems included firms increasing their hourly rates to make up for shortfalls in fixed recoverable costs without any justification and without managing expectations, leaving it to external agencies to choose and instruct experts, and failures to take instructions and prepare witness statements.
Ms Graves said: “It beggars belief that this needs to be said yet many lawyers gripe endlessly about how they don’t have the time to engage with their client regularly to take instructions. There really is no substitute. An attendance note from a 20-minute telephone call can be very easily transposed into a witness statement and sent out for signature.
“Getting a signed document from your client means more certainty and less wiggle room in litigation, particularly important in relation to clause 49 of the Criminal Justice and Courts Bill and its focus on claims where there is ‘fundamental dishonesty’.
Ms Graves said: “I fear that some PI law firms are creating the sector’s next big storm – a market of its own making. A failure to properly serve clients resulting in poorly negotiated liability settlements and undervalued compensation awards is opening up a whole new market for ‘cannibal’ lawyers who have seen the dumbing down in the profession and are out to capitalise through professional negligence claims.”