After-the-event insurer Elite has reported motor insurer Sabre to the Financial Services Authority for trying to persuade solicitors and their clients to cancel ATE policies in return for a 10% increase in damages.
Elite chief executive Jason Smart told Litigation Futures that 70-541-VB the letters were “completely disgraceful” and he has also written to the Law Society to alert it to the practice.
A copy of the letter seen by Litigation Futures cites the Simmons v Castle decision to increase general damages by 10% after 1 April and tells the solicitor that – subject to liability being admitted – if their client elects to pursue the claim without a conditional fee agreement, “we are prepared to offer your client an increase of 10% in general damages, even if the case settles prior to 1 April 2013”.
It continues: “This offer is advanced on the condition that your client cancels any ATE policy that has been purchased, and that the claim is not funded through a CFA. Our offer will be made in a form that clearly demonstrates the additional money that your client will receive…
“For expediency, we have sent a copy of this letter directly to your client, as your client will have a 14-day cooling off period in which to cancel the ATE policy without charge.”
Mr Smart criticised Sabre for contacting the client directly when it knew a solicitor was instructed, and said the offer would weaken the position of claimants and their solicitors, who would have to negotiate with the insurer without any costs protection. This would make it hard to reject a low offer.
“I’m very annoyed – not because I expect a plethora of ATE policies will be cancelled but because it creates uncertainty for the claimant. I’ve never seen anything like this,” he explained.
Sabre claims director Trevor Webb described the allegations as “absolute nonsense”, although he said that for “operational reasons” the company is no longer copying the letter to clients.
He questioned what risk existed for which ATE was needed, saying he has never recovered any costs in portal cases. “Solicitors are in an absolutely fantastic position to advise their clients,” he argued. Mr Webb also asked whether solicitors are doing enough to explore whether they have before-the-event cover.
The insurer said the story had prompted phone calls from other insurers who said they would be following Sabre’s lead.