Law Society intervenes in high-stakes appeal over the ‘£400 club’

Law Society: written submission

The Court of Appeal has invited the Law Society to intervene in a highly significant hearing this month in which insurers are trying to recover millions of pounds in RTA claims portal fees from claimant solicitors in the so-called ‘£400 club’.

Judges are to hear an appeal in Iqbal & Anr v Leek & Anr, which has been leapfrogged from the ruling last April of District Judge Phillips in Cardiff.

According to a report before yesterday’s Law Society council meeting, Lord Justice Lewison – the supervising Lord Justice for costs appeals – invited the society to intervene by way of written submissions in the case. It has done this and the hearing is due this month.

According to Horwich Farrelly, which is acting for the defendant insurer, between 2010 and 2013, a “significant number of claims” were submitted to the portal by claimant solicitors where stage 1 costs of £400 were paid, even though the claim did not progress beyond that point. This has long been dubbed the ‘£400 club’.

The firm said there was a concern amongst insurers that many of these ‘abandoned’ claims were at best speculative and at worst perhaps fraudulent and they lobbied for a change to the pre-action protocol to close the loophole.

This was done in 2013, when the protocol was amended so that stage 1 costs were only payable upon receipt of the stage 2 settlement pack, including evidence in support of injuries and losses.

Claimant solicitors have always contended that, under the rules prevailing at the time, they were entitled to retain the stage 1 costs even if the claim did not progress.

Horwich Farrelly reported last year that, in ordering reimbursement of the stage 1 costs on three claims, DJ Phillips said that, despite the wording of the protocol at the time, the whole system was based upon the premise that claims would proceed to stage 2, a conclusion he said was reinforced by the 2013 change.

At the time of his ruling, Horwich Farrelly partner Patrick McCarthy said a conservative estimate of the potential recovery by insurers from claimant solicitors was at least £10m.

He said: “We have believed for some time that stage 1 costs are an interim payment which, if a claim is not pursued, should be recoverable, and have been working to test and challenge perceptions to the contrary…

“£400 may seem a relatively small amount in claims terms, but the high number of claims involved means that a huge amount of money could be owed to motor insurers.

“According to the published claims portal statistics, over 2.3m claims notification forms were submitted between 2010 and 2013, and around 20% of the related claims appear to have remained ‘in the system’ i.e. they haven’t been settled or moved out of the portal process.

“Even if only a small proportion of these are part of the ‘£400 club’, the total stage 1 fees involved across the industry could run to tens of millions of pounds.”

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