The introduction of fixed fee legal costs for motor claims will have an obvious impact on cost negotiators' workloads But the change could create a more streamlined, specialist profession. Michael Faulkner investigates.
The introduction last year of predictable fees in low value motor claims was a significant development in the fraught and much-litigated question of legal costs.
But while insurers welcomed the move as a positive step in their fight against spiralling claims costs, it has hit the workload of legal costs negotiators. And with discussions underway to extend the scheme to employers' liability (EL) claims, cost negotiators face a further blow to their industry.
Legal Costs Negotiators negotiations manager Simon Gibbs says: "The volume of work has started to reduce. Cost negotiators are already shedding staff, but there is a long run-off for older cases so the full impact won't be seen for another year. There will be a large amount of work taken out."
Cost negotiators are companies that negotiate and recover costs for their clients, often insurance companies dealing with motor insurance. So it is hardly surprising that the move to predictable fees has affected negotiators' workload: after all, if solicitors' fees are fixed, there is less to be negotiated.
Yet, despite the impending fall-off in work, Gibbs is optimistic about the future. "It will improve the costs industry. It will get rid of the poor quality negotiators, increasing overall quality," he says.
Gibbs' point about the image of the industry is an important one. Many see negotiators as "number crunchers"; others have described them as "cost muppets".
"The way the costs industry has operated has been problematic," says Gibbs. "It has employed monkeys and paid peanuts. For companies like us, these changes (to fixed fees) are an opportunity. We employ skilled people and will survive; the ones that don't will fail. Success will be down to quality."
QM Legal Cost Solutions director Tim Ryan says that if the costs industry is to break free of its negative image and thrive it needs to be seen as a specialist service.
"We need to move away from the 'percentage saved' approach," says Ryan, a reference to the fact that the cost industry is used simply as a mechanism for insurers and other clients to shave a few percentage points from a costs bill. "Negotiators need to be qualified, and able to deal with the legal and technical issues," he continues. "They need to be ahead of the case law and be able to interpret the way the courts are developing costs policies."
Ryan is confident that there will continue to be work despite the move to fixed costs. "Predictable fees may be predictable," he says, "but there is a whole raft of regulations that accompany them that will be the subject of argument. We have an adversarial system and parties will always be in disagreement over something."
He says that if the costs system was further streamlined there could be an impact, but he doubts this would happen. "A no-cost system was argued before the Court of Appeal, but it was thrown out."
Gibbs also points to a number of areas that will continue to be fruitful sources of work for the costs industry. "The future of costs negotiators is in higher value motor claims and litigated cases, those falling outside the scope of EL predictive fees - if it comes to that - and other areas of law."
It is the "other areas of law" that Gibbs' company is looking to develop.
"We are looking at more unusual areas," he says. "Historically negotiators have tended to target the large insurers dealing with motor claims. We are looking at more niche areas such as professional liability."
Beyond niche areas of law, there are other opportunities that costs negotiators are looking to exploit. Sterling Costs Consultants managing director Doug Vickers says his company is now drafting bills for solicitors and also doing court appearances. His rationale mirrors that of other cost companies: "We want to go beyond standard road traffic accident cases and become more technical," he says.
Every cost negotiator seems to want to become more "technical". Whether the companies are able to do this boils down to training and competence - which comes neatly back to Gibbs' and Ryan's points about quality and skills. As Vickers says: "If we do a good job, there will be business."
