Lisbon-bound for the NYSBA seasonal meeting

Today, I’m Lisbon-bound for a conference hosted by the New York State Bar Association at the Pestana Palace hotel. By all accounts this is a fine, city centre hotel, though I’ve opted to stay away from the hustle and bustle at The Oitavos Hotel, some 40 minutes drive from Lisbon.

This is my first trip to Lisbon, and next week I’ll post a snapshot of my impressions of this venerable and historic city. As I write, however, the task in hand is preparing a short speech I’ll give on Saturday morning, as well as a panel discussion. Between 9.00 and 11.00am, debate will centre on Alternative Law Firm Structures around the world, in a plenary session chaired by Kenneth G. Standard of New York firm Epstein Becker & Green. Other panellists include Vasco Marques Correia, the president of the Lisbon District Council of the Portuguese Bar Association; Junlu Jiang, of King & Wood Mallesons, Beijing; and Steven Younger, from Patterson Belknap Webb & Tyler LLP, New York.

I will be talking about Alternative Business Structures (ABSs), first proposed in Britain six years ago by Sir David Clementi, then given statutory footing in 2007 by the Legal Services Act and finally ushered in by the Solicitors Regulation Authority earlier this year. ABSs were much touted prior to their arrival as heralding a brave new world that would be of great benefit to consumers. They would allow non-lawyers to own and invest in law firms, thus revolutionising the legal profession because clients would have a cheaper, one-stop option for their legal needs.

Among those who sounded cautionary notes about ABSs were sole practitioners and small firms, who were wary of the notion of ‘Tesco law’ and ‘one size fits all’ for legal problems. I was also dubious about ABSs given the way in which they could be deployed to circumvent the Ministry of Justice’s  ban on referral fees in personal injury cases to be implemented in April 2013.  Because ABSs enable insurers and claims management companies to own and invest in law firms they can sidestep the MoJ’s efforts. It cannot be good for the consumer for a culture to arise which sees insurers start handling PI claims from start to finish.

In Britain, the take-up for ABS licences has been relatively slow, but the bandwagon is moving. More and more law firms are set to form alliances with other businesses, creating more ABSs. I do not object per se to the idea of ABSs, provided not only that a watchful eye is maintained on their ability to sidestep the ban on referral fees but also that the profession as a whole abides by its age-old principles. By this I mean that professionalism and ethical conduct must not be allowed to play second fiddle to the commercial dictates of outside ownership or too obsessive a focus on shareholder value.

The danger, with ABSs, is that he who pays the piper calls the tune. As lawyers, our tune must sing to the client’s good, first and foremost. ABSs are acceptable, so long as this is not forgotten. This is the most serious issue for debate.

Praise Be: the OFT has a go at Backhander Britain

At last, a breath of fresh air in the debate about the insurance industry. It came last week in the form of the Office of Fair Trading’s report on private motor insurance. Make no mistake: for those of us who have been banging the drum for reform, the OFT’s report was just what the doctor ordered, all the more so because it came in the midst of a barrage of spin about supposedly bogus whiplash claims and their dire effect on motorists’ premiums.

But the OFT report is not merely welcome because of its timing. Its clarity and sense are as impressive as its provisional decision to refer what it describes as the “dysfunctional” UK market in private motor insurance to the Competition Commission for full investigation. Transport Committee chair Louise Ellman applauded the report, describing it as “a major step forward” and declaring that the Committee ought to engage in the ensuing consultation process with a view to making “the strongest possible case for the referral”.

It is to be hoped that referral duly comes to pass. The insurance industry has mutated into an industry where profiteering sometimes seems to be the insurers’ sole motivation. Karl Tonks, the chairman of the Association of Personal Injury Lawyers (APIL) summed up this highly regrettable state of affairs:  “What the OFT calls ‘dysfunctional’ and ‘inefficient’ actually reveals a host of grubby practices to line insurers’ own pockets, to the tune of an extra £225 million on car insurance premiums last year.”

This is the truth that the insurance industry dare not allow to be uttered. Premiums keep rising and insurers blame everyone but themselves for what is happening. The reality is that real change – to the consumer’s benefit – entails a root and branch reappraisal of how the insurance industry operates. This, in turn, entails confronting the unpalatable fact that here, in a core service sector which affects us all, backhander Britain is alive and well.

Thankfully, the OFT report begins the process of tackling this. It reveals the shoddy practices that those of us who practise in this area see all too often, including the ramping up of repair costs and the charge of hiring replacement vehicles. In effect, insurers collude with vehicle hire companies and repairers (for example, paint and car parts suppliers) to inflate charges, and why? Because they’re in for kickbacks – and because higher costs for a claim will help to dent a rival’s profitability.

The OFT report is welcome, but any investigation by the Competition Commission won’t begin until autumn and may then take up to two years. Why not, in the interim, a voluntary abolition across the board of the insurer practices uncovered by the OFT?

We can be justly proud of Queen Elizabeth II and last weekend’s Royal Jubilee, but Backhander Britain is not something to proud of. Hats off to the OFT for lending significant authority to those of us who’ve had enough.

Time for compromise and understanding

Yesterday I chaired a conference entitled ‘Whiplash: The Evidence’. It was hosted by the Association of Personal Injury Lawyers (APIL), of which I am a Fellow, and took place at the Grange City Hotel, near the Tower of London.

The Tower is well-known for having a bloodthirsty history, but I was surprised to learn that the Grange City Hotel has also hosted amateur boxing events. Perhaps some of the bouts even happened in the same room set aside for APIL yesterday – a strange thought.

But then again, perhaps a sense of conflict lurking in the margins was appropriate, for when it comes to the ongoing debate about whiplash it seems that polarised views have been taken and battle engaged. Or, to use a boxing metaphor, the two sides have not only laced up their gloves but have climbed through the ropes and now find themselves bloodied but still standing in the mid-point of a particularly savage fight.

My hope, after yesterday’s conference, is that the hostilities cease. The two sides – insurers and government on one side, with claimant solicitors and medical experts on the other – need to forge a dialogue and start working together to resolve the problems of a system that has become dysfunctional. Nothing is ever gained by rushing through reform; change needs to be holistic and sensibly considered. It is not too late for this to happen even in an area as controversial as whiplash.

In the hope that compromise between the two combatants can be found I suggested yesterday that solicitors should hold their hands up and acknowledge that there are problems in our profession. That there are problems is, after all, no secret. Some solicitors have forgotten the standards they should adhere to, others think more of their profits than their clients. We need to commit to the Benson principles – about which I have written here before – and agree to robust regulation by a regulator which enforces professional standards and has the tools and inclination to punish those who transgress. A robust regulator will help to stamp out the various other maladies which dog our profession – cold calling, advertising which incites litigation, and conflicts of interest.

If the legal profession is prepared to hold out an olive branch, I hope it will be reciprocated by the insurance industry – and prove to be a prompt for a united approach to reform in this sector. This, of course, would entail the insurance industry accepting that it needs to put its house in order, too. Many practices need to change, not least calling injured parties and convincing them to settle (with no medical assessment and no legal representation), then chalking up the resulting under-settled cases as ‘whiplash’ claims. We then need to ensure that the drive to ‘reform’ is slowed down and properly managed. At present, the bandwagon is pushing for the introduction of insurer-driven changes to the RTA portal and small claims court by April 2013. This is clearly wrong.

Reforms that I would like to see the insurers accept can be succinctly summarised. No personal injury claim should ever be settled without supporting medical evidence – or legal representation. If this were agreed I have a strong suspicion that the ‘whiplash epidemic’ would soon start to abate. Next, we need to upskill our understanding of whiplash as an injury. There needs to be consistency across all cases, informed by the necessary biopsychosocial model. There also needs to be better data sharing. Insurers need to share IFB data with claimant representatives. By sharing this information we can identify patterns of claiming and ensure improved fraud prevention.

Add to this a commitment by insurers to pass on costs to motor policy purchasers via a simple percentage mechanism where claims costs reduction equate to reduced premiums and we will have a system with less fraud, less costs and increased fairness.

Isn’t that worth striving for?

I hope so. Here’s to less by way of pugilism by the opposing sides and more consensus, understanding and compromise.

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.

Changes to the RTA Portal need clarity of thought

This time next week I will be attending an interview. Well, not an interview in the traditional sense of the word, but an interview with Andrea Nicholls of College of Law Media. As part of a video series for Continuing Professional Development (CPD) for lawyers, Andrea will be asking me a number of questions about the RTA Portal, the electronic Portal put in place nearly two years ago to support the Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents.

I’m looking forward to this particular interview – and my good mood is not solely down to the fact that Fernando Torres has remembered how to score goals. I can’t help but be pleased by this development, not least as last weekend’s 4-2 win at Aston Villa has helped put Chelsea back in with a decent shout for a Champion’s League place, but I'd applaud the approach to the interview for another reason, and it can be summed up in one word: clarity.

Andrea Nicholls is a writer-presenter as well as an employment lawyer, and she has kindly sent through a list of pre-interview questions which are well expressed. Combined with further clarification in discussion hopefully Andrea will have ensured the session meets the objective, of practical and relevant advice to practitioners. 

Andrea tells me I can’t wear blue – apparently, I will be rendered akin to the Invisible Man if I do – but aside from this modest disappointment (see above: it’s a Chelsea thing) I couldn’t have been treated more courteously before a televised interview. I’m optimistic that we will, as Andrea hopes, end up having a relaxed and yet informed conversation rather than a stiff and stilted interview. But if Andrea’s questions about the Portal are a refreshing model of clarity, regrettably the same cannot be said of the government’s proposals for change in this area.

Here, clarity of holistic thought is sadly as absent as Torres’ goal-scoring for most of this season. This is especially so when it comes to the ABI inspired proposal to fix at £300/£400 the fee for low-value road traffic claims handled through Portal. This would amount to a dramatic reduction from the present fixed costs of £1,200.  In reality, the protocol requires over eight hours of work.  The danger is obvious namely that such a slashing of costs will encourage or even force cutting of corners; in any event, it can only prompt a lack of professionalism, perhaps even encouraging spurious claims and even fraud.

The Ministry of Justice has begun meetings with stakeholders over its plans to make changes to the Portal, a key limb of which is extending the Portal to a £25,000 limit (a £15,000 increase from the current cap). This, too, is fraught with difficulty, both in the apparent rush with which the MoJ want to see the changes implemented – within just a year – and the extension of the Portal to covering employers’ and public liability accident claims.

As with too many of the initiatives emanating from the government in the personal injury sector, there is a sense both of undue haste and that a bandwagon is being pushed headlong to an uncertain fate. What is required is a holistic approach and a sensible consideration of the practical workings of the Portal, so that such changes as are made are in the best interests of the injured person as well as the public at large.

If only the government could adopt some of Andrea Nicholls’ clarity of thought. Meantime, I will continue to look forward to next Wednesday’s interview – and albeit that I can’t wear blue, I will also hope that Fernando Torres sustains his return to form, particularly since I sit finalising this blog in the Aziz deli, round the corner from Stamford Bridge, and before doing battle with Benfica!

The LASPO bill and the insurance industry: too close for comfort

Earlier this week the House of Lords voted on measures in government's Legal Aid, Sentencing and Punishment of Offenders bill (the LASPO bill), that which is intended to implement various reforms to the civil justice system proposed by Lord Justice Jackson. Fortunately, the vote resulted in a decision to delay implementation until April 2013.

As Lord Wallace of Tankerness put it, the drive to make radical and necessary changes has to be balanced against the need for thoroughness: "We believe that these are important measures and we want to implement them as soon as possible in order to control the costs of civil litigation. We wish to make sure that we get the details of these regulations and rules right, and that will inevitably take some time."

There will many observers who will have breathed a sigh of relief at the announcement by the Lords. Rushing through legislation is rarely a good idea. Time and thought are necessary to ensure that changes are fair, sensible and workable. At a time when a holistic approach is needed to resolve the problems in civil litigation and, especially, the personal injury sector, the LASPO bill, in its present form, is none of these things.

But just as I welcome the delay in LASPO's implementation, I cannot but be concerned by revelations of the cosy relationship between the government and the insurance industry. As The Guardian reported on Monday, insurers were given extensive access to the civil servants charged with drafting LASPO. The result is a bill that seems dangerously slanted towards insurers, benefitting the industry to the tune of hundreds of millions of pounds.

Thanks to a request under the Freedom of Information Act, it appears that the head of civil litigation funding and costs at the Ministry of Justice and the official in charge of the Jackson reforms, and his team gave the Association of British Insurers (ABI), the industry lobbying body, a great deal of information on their plans. This seems to have occurred with such regularity and willingness that Desmond Hudson, the Law Society's chief executive, described LASPO as "legislation for the insurance industry, by the insurance industry."

Naturally, the ABI rejects the charge of collusion. A spokesman said: "We have not said anything in private that we have not said in public and we have nothing to hide. We make no apology for providing evidence to policymakers to tackle the compensation culture and help reduce motor insurance premiums. The ABI, unlike the claimant lawyer lobby, has provided the evidence and analysis to support our public policy positions rather than rely on rhetoric and anecdote."

But, as the ever-readable Left Foot Forward blog says, "40 Conservative MPs, including the prime minister, chancellor, and minister of justice, have or had interests in the insurance industry." Chief among them would seem to be Jonathan Djanogly, the Justice Minister, whose shareholding in Aviva PLC amounts to a £97,000 conflict of interest. Evidently he is far from alone: the Central Conservative Party office and constituencies receive financial donations from a range of figures in the insurance industry and business connected to the insurance industry.

This week we have also seen Sir Fred Goodwin stripped of his knighthood. The Forfeiture Committee's decision to pour such ignominy on the man who played so large a role in the near collapse of the Royal Bank of Scotland has been welcomed by David Cameron. It seems to me, however, that the Prime Minister would do well to look closer to home. The government's house, when it comes to the insurance industry, is not in order.

It’s time for a holistic approach to NHS Trusts and PI advertising

Last week Andrew Bridgen, the Tory MP for North West Leicestershire, put down an early day motion attacking the prevalence of advertisements for personal injury lawyers in hospital waiting rooms.

“The Prime Minister talks about slaying the ‘health and safety monster’, but we’re feeding the monster and it’s going to get bigger,” said Bridgen. His comments were echoed by Simon Burns, the Health Minister, who told The Times he would be writing to Sir David Nicholson, chief executive of the NHS, about the ads. As Burns put it: “Patients should be able to focus on getting better, without having to be hounded by lawyers or adverts displayed in A&E departments. I will ask David Nicholson to write to hospitals to remind them it is not acceptable to display these adverts.”

Years ago, when I was a young solicitor, I recall another lawyer who took a robust view of advertising his firm’s services in hospitals. He was in the habit of visiting hospitals and not merely advertising his services, but removing any ads which promoted rivals. Back then, his conduct, unblushing as it was, seemed almost amusing, but times have changed. Our personal injury system has mutated into one which is rife with ingrained failure, not least when it comes to hospital ads for PI lawyers.

In fact, Department of Health guidelines prohibit the advertising of PI services in hospitals. A number of NHS trusts routinely ignore the ban, for a simple financial incentive: they may be paid up to £85,000 a year to feature the ads, or given donations of equipment and uniforms. In the cash-strapped years of the early 21st century, the trusts’ willingness to continue advertising lawyers’ services and the availability of no win, no fee claims is understandable, but their concomitant bargain with the devil is not so palatable: the firms advertising promise not to sue hospitals which carry their adverts. Instead, the tacit, or perhaps even express, understanding is that firms will seek compensation from anyone else in the chain of liability. This, in turn, can only feed the perceived compensation culture.

The Solicitors’ Code of Conduct contains provisions as to what law firms can and can’t advertise. Naturally, those firms who continue to target hospitals will comply with the Code. However, by way of a radical alternative, consider the situation in at one stage in Australia: there, advertisements for PI work were banned per se.

Here, it seems once again that the momentum which seeks to reduce the excesses of the PI market is in danger of not being fully thought out. Messrs Bridgen and Burns may (laudably enough) lament practices among various NHS trusts and seek to change them, but have they considered the impact of the Alternative Business Structure (ABS) regime in this sector? It’s all well and good to end the practice of lawyers advertising PI services in hospitals, but what is to stop a claims management company, set up under an ABS to employ PI lawyers, from doing exactly the same thing?

I welcome a ban of hospital advertising for PI claims, but unless it is approached in an intelligent, holistic manner, loopholes will remain.

Claimants should be free to bring claims as they see fit

The second reading of the Legal Aid, Sentencing and Punishment of Offenders Bill (LASPO) took place at the tail end of last year. It was accompanied by a number of amendments, tabled by members of the House of Lords. One especially is very welcome: that which seeks to prevent insurers approaching claimants directly.

Lords Thomas of Gresford, Clement-Jones, Carlile of Berriew and Phillips of Sudbury proposed the amendments, which were reported in The Law Society Gazette at the beginning of December. They seek to stop the practice known as 'third party capture', which usually happens in road traffic accident (RTA) cases but could also extend to other scenarios, for example a claim relating to an injury in the workplace.

In a case of third party capture, an insurance company representing the individual who caused a victim's injuries contacts the injured party directly. The injured party is not legally represented, but the insurer goes ahead and settles the claim regardless. Typical incentives to ensure speedy settlement will be phrases like 'If you agree this figure now, I'll have it transferred to your bank account later today' and 'Of course, you're entitled to go and see a solicitor - but we all know how much time they take up, so perhaps you'd like to come to an agreement now so that you can get on with your life?'

Such settlement is intended to be full and final. There's nothing to be done about it once it's been made, and guess what: it's never for the maximum amount that could have been claimed. The whole point of third party capture is to under-settle claims, to the insurer's benefit and to the claimant's detriment.

I do not object to an individual actively choosing to deal with the other side's insurers. If a person makes this decision willingly, that is a matter for them. But what goes on at present is wrong: it is another example of the dysfunction which abounds in the personal injury sector. Indeed, my worry is that the Lords' amendments (to clause 55 of LASPO) do not go far enough. Here's the new clause 55, as proposed by the four Lords:
 

Third party's insurance company

(1) A third party's insurance company may not solicit a claimant who has a cause of action for personal injuries against its policy holder, to settle that cause of action where to the knowledge of the insurance company, the claimant is legally represented.

(2) A third party's insurance company may not make an offer to settle in circumstances not prohibited by subsection (1), unless-

(a) it has obtained adequate medical evidence of the personal injury and has disclosed it to the claimant; and

(b) the claimant is advised when the offer is made of his right to obtain legal advice; and

(c) the offer is in full and final settlement of the cause of action.

(3) Any settlement made in breach of subsections (1) and (2) shall be void. 

Look carefully at the words italicised above. I suggest that these be deleted; likewise, that paragraph (2) (c) is removed. The reasons for these amendments respectively are, on the one hand, that the claimant is even more vulnerable where he or she is not legally represented. Insurers often contact claimants before they have legal representation: it is well known in the insurance industry that the quicker you can contact a claimant following an accident, the more likely you are to be successful in capturing that client prior to them taking legal advice.

On the other hand, I propose the deletion of the full and final settlement clause to ensure that the existing legal position is not interfered with. Paradoxically, the Lords, by inserting clause (2) (c), create the inference that a settlement made is valid. I believe clients should be able to reopen a claim at the moment where an insurer has inappropriately settled the case direct.

Some who have reached agreements directly with insurers to settle claims feel cheated and desperate to do something about it after the event, but more often people are simply unaware.  As a practice, third party capture is plainly wrong, but those of us who wish to do something about it must be vigilant and ensure that the Lords' amendments, welcome as they are, cover all the bases.
  

Accident victims should be entitled to instruct the solicitor of their choice

Picture the scene. You’ve been injured a mile from your house in a road accident. Fortunately, your injury isn’t life-threatening. However, it’s still painful and upsetting – perhaps a broken leg, or a badly damaged arm. The accident wasn’t your fault and, naturally enough, you’d like to make a claim for compensation. With a sigh of relief – for everyone knows that lawyers can cost a small fortune – you remember that your standard household policy also provides legal expenses insurance (LEI). Once back home, you dig out the policy and make a claim.

So far, so good. But then, a little later, you receive word from the insurance company that a firm of solicitors you’ve never heard of has been appointed to handle your claim. Worse, they’re at the other end of the country. They won’t be rushing down to see you to take instructions. If you want to go and see them, fine, but it’s hardly practical. You’ll have to accept that your relationship with them will be entirely over the phone and via correspondence.

You might not mind this, but many people do – especially if their accident isn’t straightforward. In such cases, local knowledge can be vital, but even if it isn’t the fact is that when people go through the trauma of an accident they often like to know the solicitor who handles their claim (or, at least, be able to get to know him or her). Their case, then, takes on a human dimension, rather than appearing as a statistic on a conveyor belt.

Regrettably, what ought to be a basic human right – to instruct the solicitor of one’s choice – is not as straightforward as it should be in Britain. A European Council directive (Directive 87/344, to be precise) provides that insurance contracts providing LEI should allow the insured a lawyer of their choice “from the moment that he has the right to claim from his insurer under the policy”. The Directive was tested in the European Court of Justice (ECJ) some two years ago, via the case of Austrian citizen Erhard Eschig (ECJ Case C-199/08). Eschig instructed the law firm Salpius Rechtsanwalts GmbH to represent him in several financial misselling claims. He sought confirmation from his insurer, Uniqa, that his legal costs would be met. Uniqa refused, stating that ‘mass claims’ (Eschig’s was one of many) would only be covered if handled by law firms on its panel.

Eschig complained. He challenged Uniqa, and the ECJ upheld his claim. It ruled that Uniqa’s purported limitation of the policy to mass claims was in breach of Directive 87/344.

As with so many European Directives, uncertainty as to their application in Britain prevails – irrespective of Mr Eschig’s claim. Here, the relevant law is contained in The Insurance Companies (Legal Expenses Insurance) Regulations 1990, which state:

6.—(1) Where under a legal expenses insurance contract recourse is had to a lawyer (or other person having such qualifications as may be necessary) to defend, represent or serve the interests of the insured in any inquiry or proceedings, the insured shall be free to choose that lawyer (or other person).

(2) The insured shall also be free to choose a lawyer (or other person having such qualifications as may be necessary) to serve his interests whenever a conflict of interests arises.

(3) The above rights shall be expressly recognised in the policy.

That seems crystal clear, but the practical reality is different. As many of us engaged in solicitor panel work know, insurers habitually work with panels of law firms, farming out work to their chosen panel where a key component in their choice is price. Claims will routinely be handled by lawyers who live and work miles from the victim’s abode or place where the accident occurred. Moreover, the Regulations stipulate that the freedom of choice arises in connection with “any inquiry or proceedings” – in other words, only when litigation is formally being contemplated. This is not in the spirit of Directive 87/344, which is not so restrictive.

The freedom of choice to instruct a solicitor is a basic human right. It’s a bit like supporting a football club. Some people may decry the fact that I choose to go and watch Chelsea (and after the home defeat by Aston Villa over the festive period, I lamented my decision, too) but no one can stop me from supporting the team of my choice. Similarly, no one should be able to prevent an accident victim instructing the solicitor with whom he or she feels most comfortable. If that’s the family firm, or the high street sole practitioner who’s been in the town for years, then so be it. The small print in LEI should have nothing to do with basic freedom of choice.

Will the brave new world of Alternative Business Structures undermine the government’s objective in banning referral fees?

At long last, the Solicitors Regulation Authority has announced a date for the application process for those wishing to avail themselves of the Alternative Business Structure (ABS) regime. Appropriately enough, the date is 3 January, the first working day of 2012. After what seems an age since Sir David Clementi first proposed them (six years, in fact), the new year thus ushers in the brave new world of the ABS.

Is it, though, a world which we will like? I am not so sure. ABSs were much trumpeted following the passing of the Legal Services Act 2007, given that they will revolutionise the way in which solicitors run their businesses and allow non-lawyers to own and invest in law firms. Many high street sole practitioners and some small firms, fearful of the advent of ‘Tesco law’, were quick to sound a cautionary note over the ABS regime, but they are not the only people who have reason to worry. Those of us who believe in the legal profession, especially in the personal injury sector, also have cause for concern.

Image courtesy of the Travel Blog

For me, ABSs are Trojan horses in the battle against referral fees, in particular, and the sometimes over aggressive and unprofessional approach to PI marketing. They enable insurers and claims management companies to own and invest in law firms, thereby circumventing efforts by the Ministry of Justice to reform and improve the personal injury sector – because insurers and claims management companies could, in 2012, now start handling PI claims from start to finish. They will therefore control the whole process. 

Antony Townsend, the chief executive of the SRA, is looking forward to the new world, saying, in a press release dated 1 December: “We welcome the news that we will become an ABS licensing authority from 23 December. This is a milestone that we have been working towards for nearly two years.” He goes on to add that “the public can have confidence that ABS providing reserved legal activities will be regulated according to the same rigorous professional standards as traditional law firms.” 

But how will the ABS regime tackle this issue? There is also a raft of ancillary fees paid by those outside the legal profession, the likes of medico-legal companies, garages, reporting engineers and towing companies. These bodies all habitually pay referral fees, thereby fuelling a vicious circle of money generation around some personal injury cases.  What does the SRA intend to do about this, and the fact that these companies are likely to apply for licenses to set up ABSs? 

There is, though, still time to deal with this issue. The ABS regime gets underway from 3 January, but it does not emerge complete and fully formed. The date represents the start of the application process, but it is thought that actual ABS licences will not be awarded until late February at the earliest. It is to be hoped, between now and then, that a way is found to ensure that the brave new world of ABSs does not undermine that part of the government’s commitment, namely profiteering out of personal injury claims, which many of us support. It is further to be hoped that the professional conduct of cases by the solicitors profession is fully recognised and protected in this short period,  and not fatally undermined.