Wednesday, 18 April 2012

Principles lost? The loss of professionalism in the personal injury system

In 1992 Lord Benson stated there were nine key principles of professionalism to which lawyers should adhere. Two, in particular, should be second nature to lawyers: the principle that ‘ethical rules and professional standards ... should be higher than those established by the general law’ and the principle that legal practitioners ‘must not allow themselves to be put under the control or dominance of any persons or organisation that could impair that independence’.

Regrettably, adherence to these principles is not always second nature, especially if we take a bird’s eye view of the personal injury sector. Here, as well as potentially referral fees – which the government intends to ban – there are a myriad of other practices which conflict with Lord Benson’s principles. Alternative Business Structures (ABSs) have been heralded as signalling a brave new world but they create a route to absolute ownership by insurers, who then effectively bypass the referral fee issue and achieve wholesale ownership of the entire process, from providing insurance as an indemnity insurer to solicitors making the claim against the third party. The government’s failure to any action given that ABSs will have this effect is symptomatic of a worryingly piecemeal and uncoordinated approach to the referral fee problem.

Some might say that the Legal Aid, Sentencing and Punishment of Offenders Bill (LASPO) will reform the personal injury sector. It professes to ban referral fees but, given the loopholes carved out in various places, is likely to be a paper tiger. Moreover, simply banning referral fees will not show insurers, CMCs and indeed some solicitors the error of their ways; in all likelihood, it is likely to push the practice further into the shadows. New practices will inevitably be devised which will share the detrimental and profit-driven features of referral fees. Some in the PI industry have already described to me the receipt of calls from CMCs offering to sell information with regard to prospective clients under the guise of ‘marketing information’ – a euphemism for ‘referral fee’. 

It was the proliferation of referral fees – and their associated, seemingly endless ancillary services such as car hire and medico-legal services – which have done so much damage to the PI system. Wedded to these are the advertising campaigns which CMCs and some solicitors have embarked upon. Not only do they sail dangerously close to inciting litigation, they cheapen the legal profession to such a degree that the title ‘ambulance chaser’ is not an entirely inappropriate label. Add the sale of personal data and underhand marketing tactics such as spam text messages, and we are faced wholesale systemic failure in this vital branch of the law.

If we want to grapple seriously with all the issues, we need wholesale cultural change. The government’s piecemeal, reactive approach is flawed. The interests of the public and victims of accidents must be the priority in the minds of all professionals, with profiteering stamped out.

Cynics might say such a utopian ideal for the PI system is unattainable. However, I would counter that it can exist if we rediscover and implement Lord Benson’s wisely drafted principles.

What underpinned Lord Benson’s approach is the notion that to be professional is to act in the public interest. The barometer by which he proposed to measure the standard of the profession is the degree to which individuals and their governing body act ethically. These principles should be the foundation of reform, and, even more important, practice. If the mindset of all the participants within the personal injury system is focused on acting ethically in the public interest, there will be no need for ‘catch-all’ regulation. Although a minority may still exploit loopholes in the system and evade regulatory oversight, they will eventually be stamped out by market forces. In fact if you speak to potential private equity investors in the profession, they see the value of retaining and emphasising professional standards.

Such a picture may seem uncharacteristically optimistic from someone who has written of his dismay about our industry and current efforts to reform. However, for every organisation or individual I have encountered who has displayed contempt for the public good, I have met dozens more who wish to do the best for their clients. It is because of this that I am certain that our profession and the industry can save itself from ruin and regain the principles which have been lost.

For any readers who are APIL members it is intended to publish a fuller article on this subject in the May edition of Focus, or if you are not and prefer please let me know and I will provide a full copy of the article.

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