The Jackson reforms will leave law firms at risk of professional negligence claims, a leading after-the-event (ATE) insurer has warned.
Russell Smart, COO of Elite Insurance, a Litigation Futures sponsor, said any conditional fee agreement (CFA) entered into prior to 1 April where ATE insurance has not been purchased could potentially leave clients facing bankruptcy or law firms exposed to negligence claims.
The new rules prohibit the recovery of ATE premiums for policies purchased on or after 1 April regardless of when the client entered into a retainer with their solicitor, he pointed out.
Mr Smart said: “There are thousands of CFA cases where ATE insurance has not been purchased either because the case is not insurable until investigations are complete, or because BTE enquiries are on-going.
“Despite many of these CFAs being entered into some weeks and possibly months ago, this will mean the client will not benefit from recoverable ATE premiums – but neither will they be afforded the protection offered by qualified one-way costs shifting, nor the 10% increase in general damages.”
Such clients will now have to pursue their cases uninsured or face disproportionately high ATE premiums which will have to be paid for from their damages, he argued.
“The rule merely emphasises the lack of thought put into these reforms and highlights the government’s incompetence. ATE insurers tried to engage with Lord Justice Jackson and the Ministry of Justice over the last three years but without success and therefore it does not come as a surprise that they have not thought through the ramifications.
“The rules should be amended to allow for recoverable ATE premiums based on the date the CFA was entered into. However, given the government’s haste, this is unlikely.”