Insuring the client is offered the best options
25 November 1997
The legal profession and legal expenses insurers need to work together to find the most cost-effective ways of providing access to justice for all, argues Bob Gordon. Bob Gordon is director of Greystoke Legal Services, which provides LawAssist.
Amidst the learned debate and emotive headlines following Lord Irvine's speech on legal aid reform, I suspect the public are more confused than ever about what their options are if they decide to go to court.
This confusion presents the solicitor with an opportunity and an obligation to clearly set out all the options for the client. Together they can then decide whether to proceed with a case, and assess the risks.
A sample of 1,000 solicitors, when asked, agreed that clients should be provided with all the choices before embarking on litigation hardly surprising in view of the Law Society's guidelines on giving advice.
A view that is also gathering strength is that a solicitor could be considered negligent for not pointing out the financial consequences of choosing each route, and even liable for the amount the client loses by selecting the 'wrong' route.
One of the options is after-the-event insurance, which provides a simple route to access to justice, in which the risks are weighed and the costs predetermined. After-the-event insurance can work in con junction with other methods of covering litigation costs, including conditional fee arrangements (CFAs) and legal aid.
LawAssist after-the-event cover operates in three ways:
1. As a standalone policy that obviates the need for a CFA by providing cover for both own and opponent's costs and disbursements.
2. Cover for opponent's costs and own disbursements only, as an alternative to Accident Line Protect usually in personal injury cases, class actions, medical negligence cases and also where cover for barristers' fees is required. This type of cover can be extended gradually as the areas of law to which CFAs apply are widened. The solicitor should advise clients that if the case is successful they may be better off using LawAssist as a standalone policy rather than in conjunction with a CFA.
3. Solicitor's own costs in CFA cases, provided the client has been notified. This form of cover enables firms to greatly reduce the success fee element of the CFA to reflect the "cost" of the lack of payment on account from clients, and the much lower risk exposure to the firm should the case fail.
The litigant is usually better off with after-the-event cover than a CFA. The solicitor may consider that the absence of risk provided by after-the-event cover is fair compensation for the lack of a success fee.
Lord Irvine raised the prospect of insurance premiums being paid out of legal aid funds to enable applicants to pursue a case under a CFA.
LawAssist is often asked to cover legal aid cases where the client is asked to make a contribution to costs. Many clients in this situation, when they discover that their share of the costs is likely to grow steadily and for an unknown period, opt for LawAssist in place of legal aid.
Where a limited legal aid certificate has been granted, if the case requires investigative work for example, in a medical negligence case insurers will not normally offer cover until the merits of the case are established.
With LawAssist, the policy can be backdated, under some circumstances, to cover costs already incurred once the merits are sufficiently established to allow the case to be underwritten.
Lord Irvine also advocated greater use of merit testing in his law reform proposals.
Before LawAssist will accept a case, the legal team has to be satisfied that an action has a good chance of succeeding, and may even suggest ways of reinforcing the case. Thus both the solicitor and the litigant go to court knowing they have a good chance of success and that they are covered if they lose on liability.
If conditional fees are extended, solicitors will increasingly have to use their judge ment not only as to whether their client's case has a good chance of success, but whether the practice can afford the consequences of losing.
The market for legal expenses insurance, both in conjunction with CFAs and as standalone cover, is destined to grow, and Lord Irvine's remarks will accelerate the trend. In this changing climate, the best way forward is for the profession and insurers to work together to find more cost effective ways of providing access to justice.