Association of Personal Injury Lawyers
Personal injury:
‘... a difficult and challenging marketplace’
Catherine Baksi surveys the crowded and demanding landscape that is personal injury practice nowadays.
About the author
Catherine Baksi is a freelance legal journalist
Personal injury practitioners have faced assault on all fronts over the last couple of years in the government’s drive to cut litigation costs and clampdown on the perceived compensation culture. The Jackson reforms, introduced in April 2013, hailed a dizzying array of new costs and case management rules, the ban on referral fees and the end of the practice of recovering after-the-event insurance premiums to name but a few.
Significant fee cuts and the introduction of fixed fees added to the pain, as have hugely hiked court fees. Together the measures have fundamentally changed the personal injury landscape, forcing firms to reassess their business models and develop new skills as well as causing concern over their impact on access to justice.
Rachel Stevens, a Chartered Legal Executive at Weightmans, summarises the situation from both sides: ‘As claimants’ solicitors are unable to obtain a success fee and are now required to receive fixed costs, it is diÿcult to ascertain whether [claimants] are getting the appropriate legal service and the claim is being dealt with someone of suitable experience.’
‘As a defendant firm, we have found that more claimants are pursuing litigation as they have nothing to lose as, if they are unsuccessful, they are not required to pay the defendant’s costs.’ She adds: ‘The reforms are only part of the solution, and further reforms are required to remove dysfunctional behaviour from our system.’
As Philip Sherwood of PRS Legal Services Ltd, and a self-employed Chartered Legal Executive and costs consultant, states: ‘There have been huge changes for the personal injury market. Things are diffcult now for everyone, even the largest firms. I know there is not much sympathy for lawyers, but there is a knock-on effect to clients.’
Simon Stanfield, partner at Colemans-ctts and vice-chairperson of the Motor Accident Solicitors Society, observes that many firms are still struggling to cope with the impact of the ‘monumental’ changes. ‘Colleagues have suggested that they are having to either get big or get out,’ he says. Several firms, particularly smaller ones, have found that they are no longer economically viable and have exited the market, while others have been forced to let staff go.
Another trend has been towards diversification. In particular, says Stanfield, into the fields of clinical negligence and industrial disease. ‘There is an abundance of industrial disease work out there: it’s become the new whiplash and firms are jumping on the bandwagon to do it,’ he notes. This has prompted concerned noises from the Association of British Insurers (ABI). And as the ABI has the ear of the government, Stanfield suggests that action to limit fees or introduce a fixed fee regime could be on the cards in this area soon.
North East firm TLW Solicitors is among the practices that altered its business approach in advance of the reforms. Alistair McDonald, head of marketing and business development, explains that its work before the changes had been ‘RTA [road traffic accidents], slips and trips, soft tissue injury, and run-of-the-mill PI.’
But it has diversified into providing services for people who had been victims of financial mis-selling , as well for those with more complex and serious injuries. Indeed, McDonald was brought into the firm because of his background in the health care sector, in particular, in the field of neuro-rehabilitation .
Apart from marker exits and workforce cuts, Nick Kitchen, a Chartered Legal Executive and costs draftsman at pricing and costs consultancy Burcher Jennings, says that so far the biggest impact has been the general tail off of low-level personal injury costs work, while his firm is seeing an increase in multi-track and higher cost work. ‘It has been a slow progression, but the reforms are starting to bite’ , he says. However, the backlog of pre-Jackson cases has yet to tail off, so many believe that the full consequences of the new regime are yet to come. ‘A lot of the pre-Jackson work has taken longer than most firms realised, so the full impact may be more apparent over the next 12 months,’ predicts Stanfield.
budgets Costs budgeting is one of the major aspects of change that firms have had to grapple with. Says Kitchen: ‘It is effectively a completely new skill for practitioners. Prior to the Jackson reforms they only had to file estimates, which were an overall single sum and generally not enforced rigorously.’
But now, he says: ‘Budgeting is much more detailed and strictly enforced. Failure to adhere to it will result in costs being limited’ .
Some firms, says Kitchen, have tried to compile their budgets themselves - with ‘mixed results’ - while others have handed the task over to the likes of Kitchen. It is, observes Stanfield, ‘a bit of a windfall for costs draftsmen’ .
Sherwood questions the economics of costs budgets. ‘Firms put a lot of time and money into preparing them, but the courts do not always look at them or make an order in relation to them.
‘Where orders are made by the courts stating the costs budget, that is useful, but it is not happening in every case, presumably due to a lack of court time.’ He suggests that it is simply adding to the front-loading of costs which firms have to bear.
And there remains a great deal of confusion and uncertainty about how the rules operate in practice. Highlighting the point, Kitchen says: ‘We have undertaken hearings where the district judge has been equally at a loss as the parties.’
The impact that the ban on referral fees has had is a moot point, with some suggesting that it has hit insurers hardest. Others suggest that the practice continues, either overtly or going under a different name. While some contend that the playing field has become unlevel between those who continue to accept work on this basis and those who do not. Adds Stevens: ‘It was presumed that the ban on referral fees would reduce the amount of personal injury claims, but there is no evidence this has occurred’ . Says Stanfield, firms now have to look at alternative ways to ensure they are compliant with the Legal Aid, Sentencing and Punishment of Offenders Act 2012, which brought in the ban.
The cuts, which have seen fees slashed to £500 – down 60% – have, as indicated above, had a dramatic effect on firms, prompting redundancies from both claimant and defendant firms. The sum, says Sherwood, makes it unprofitable for firms to take on the work and is leading to a ‘de-skilling exercise’ , with firms pushing the work down to lower levels of staff.
Stanfield agrees that firms have recruited more junior staff, increasingly students straight from doing A-levels , who are put off university by the high fees, but who are interested in the apprenticeship route. But, he insists, there is no dumbing down: ‘They are bright candidates and begin doing administrative work, but with robust training and supervision they can go on to do lower-value work,’ he says.
And where more junior staff are employed, he stresses that every part of the process must be monitored by experienced fee earners to ensure that the claim is valued correctly and no heads of loss are missed.
Though, notes Stanfield: ‘Fewer young lawyers are declaring a passion for a career in personal injury.’ Instead, he suggests, they are tempted by commercial and even conveyancing work.
The other rather unpalatable aspect of the cuts and reforms is the necessity for lawyers to take their success fees out of the sum awarded to their clients. As Sherwood states: ‘Having to take success fees from clients’ damages is not something that anybody likes doing, but it is a case of economic necessity.’
The new online portal through which practitioners must source expert witnesses in soft-tissue or whiplash cases is causing problems too. The Ministry of Justice introduced it to remove any perceived or actual financial link between the instructing firms and the experts or medical reporting organisations.
However, practitioners claim that the scheme adds to the cost and removes clients’ ability to prepare their own case. It is the subject of a judicial review by leading personal injury firms because of the government’s failure adequately to consult on the scheme before its introduction. Court fees Increased court fees, introduced earlier this year, have been another huge issue. Fees are currently 5% of the value of a claim up to a maximum fee of £10,000, but they are scheduled to rise again.
Says Sherwood: ‘They are the biggest threat to access to justice. Firms cannot afford to fund them and neither can clients. I should imagine there are a lot of cases that are not being pursued because the fee acts as a bar.’
Such fees paid simply to issue a claim, he says, are ‘arbitrary and ridiculous. ‘It is the court time that costs money. I could understand it if there was a daily fee for use of the courts, but when you issue a case, how long it will last is just a guessing exercise,’ he says.
Another matter that is causing concern and uncertainty, says Stanfield, is the issue of fundamental dishonesty. Under Criminal Justice and Courts Act 2015 s57, introduced in April, a court can strike out a claim if it finds that a claimant has been fundamentally dishonest unless to do so would cause them to suffer ‘substantial injustice’ (see also page 22 of this issue). There is, says Stanfield, no guidance on what constitutes fundamental dishonesty, and it risks generating satellite litigation.
Despite the doom and gloom, the consensus is that if firms adapt their business models, revise their processes and invest in the appropriate IT they can still thrive.
And the key, the practitioners suggest, is getting your marketing right, whether it be through networking, local media, the internet or radio and television.
This, says McDonald, is not something that law firms have, traditionally, done as well as other professional service firms. But, he says, it is now ‘playing a crucial role’ . ‘In a relatively short space of time the industry has changed, as well as fees, the whole landscape by which you market yourself has changed,’ he observes. In the crowded marketplace he says, firms can spend a lot of money for limited or no return. ‘You need to think carefully about how to do it. It is about defining how your offering is different from that of others. You need to know who your customers are, what their needs are and how you pair them.’
In addition, he says, it is important ‘to make sure your digital channels work for you’ , which means search-engine optimisation making sure that your firm is the one people find when they search online, and having website content that is relevant and ‘gives clients a compelling reason to speak to you’ . He adds: ‘You have to have a voice that resonates with consumers’ . It’s a diÿcult and challenging marketplace, but if you get it right you can still deliver a quality service to your clients,’ concludes McDonald.