Insurers could face a £4bn bill after the Court of Appeal last week upheld the legality of "no win no fee" deals.
The ruling signalled that insurers are not permitted to challenge conditional fee agreements (CFAs), or "no win no fee" deals.
Up to 250,000 victims are now in a position to continue previously thwarted personal injury claims. Claims specialists, such as The Accident Group (TAG), claim this could cost the insurance industry as much as £4bn.
The exact cost of CFAs to the industry is still the subject of fierce debate. According to Carters Solicitors, who acted on behalf of Admiral Insurance in a previous case, the amount of so-called 'after-the-event' (ATE) premiums recoverable by firms such as TAG is moored between £367.50 and £621.13.
However lawyers representing the insurers claim that the judgement has given firms such as TAG little room to manoeuvre. They claim the so-called 'claims farmers' will find it hard to exploit personal injury victims.
Beachcroft Wansbroughs litigation partner Andrew Parker, who acted for one of the insurers, said: "This judgement re-emphasises the need for consumer protection and for close scrutiny of claims management schemes. This is far from the victory for claimants trumpeted by TAG."
