Insurers seek 5% limit in no-win, no-fee cases

Insurers attending this week's Civil Justice Council cost mediation meeting are hoping to get success fees capped at 5%.

Norwich Union (NU) director of technical claims Dominic Clayden said insurers were looking to reach an agreement on the level of success fees in personal accident cases at the meeting, which will be held from 2-5 October. The meeting will include liability insurers, claimant solicitors and academics. NU, Groupama, and Churchill are among the insurers expected to attend, along with the ABI.

Success fees are charged by solicitors in addition to their hourly rate in no-win, no-fee cases. They are designed to reflect the risk to the solicitor of losing the case, and range from 5% to 100%. But Clayden said that, in reality, there is little correlation between success fees charged and the amount of risk involved.

In successful cases, the insurer is required to pay the success fee, but disputes between insurers and solicitors regarding the validity of the fee set often end up in court. Clayden said that the success fees awarded by courts can be "wildly different" in identical cases. "It's creating uncertainty for liability insurers," he said.

Clayden said that a success fee set at 5% would be the simplest option. He said that while a set fee would not reflect risk in individual cases, success fees earned on low-risk cases would compensate for the increased risk in more difficult cases. If the group failed to reach an agreement, a "real rethink" would be required, Clayden said, possibly leading to a decision to "scrap" the Access to Justice Act under which no-win, no-fee arrangements are enshrined.

Costs agreement for motor claims
The predictable costs scheme agreed upon at a Civil Justice Council costs forum in December 2002 comes into effect on 6 October. Under the agreement, which established fixed fees for pre-court proceedings for motor claims up to £10,000, legal costs are set at a flat fee of £800 plus 20% of damages up to £5000, dropping to 15% of damages from £5001 to £10,000. Norwich Union said that with between 70% and 80% of all motor claims falling within this range, the costs agreement was a big step forward.