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CGNU has prompted the demerger of Wales and South West firm Hugh James Ford Simey
Hugh James and Ford Simey have decided to split just three years after merging because insurance giant CGNU wants all panel firms to undertake its work from one office. The selected office is the Cardiff base of Hugh James. Ironically, the merger in 1999 was motivated by the desire to hang on to work from what was then CGU. Both firms were on the Commercial Union panel and Ford Simey was also on the General Accident panel. Ford Simey managing partner Simon Sanger-Anderson said that the two firms felt they needed to become bigger to protect their positions when Commercial Union and General Accident merged in 1998. But the insurance market evolved further in 2000, when CGU merged with rival Norwich Union in 2000 to form CGNU. Sanger-Anderson said: "Norwich Union is in the driving seat [of CGNU] in the UK and its claims handlers have always been different to the rest of the industry. The're much more self-reliant. They're less reliant on panel firms. Their philosophy is that panel firms must deal with all work from one office to ensure that panel solicitors have economy of scale and offer appropriate levels of provision. That can be difficult to achieve in a fragmented firm." The merger of Hugh James and Ford Simey was successful to the extent that the firm secured a place on the CGNU panel, but the firm has now been told that the work will all have to be done from Cardiff, where the firm had invested in the necessary IT systems. Sanger-Anderson said: "The size and flexibility of accommodation in Cardiff made it the best placed office. And in terms of recruitment it's easier to recruit a team of paralegals in a bigger city with two law schools." The problem for Ford Simey, which has offices in Exeter, Sidmouth and Exmouth, arose because of a no-conflict arrangement with CGNU, under which it does not work on any claims against the insurer. The arrangement would bar Ford Simey's defendant lawyers from developing a claimant practice in place of the CGNU work. "One in five claims we can generate will be conflicted out," said Sanger-Anderson. "It will cost us too much to stay together." He added that claimant work is now 30 per cent more profitable than defendant work on a case-by-case basis. This is because of the billing methods used by companies such as CGNU.