Decision to allow non-solicitors to give advice could cost insurers £1bn
Insurers are to appeal against last week's ruling that solicitors could delegate duties to The Accident Group (TAG) representatives.
The senior costs judge Chief Master Hurst gave a preliminary ruling that claims companies could lawfully act on behalf of solicitors and give information and advice on a "no-win, no-fee" basis.
This was the first of two judgments to determine the fate of the recovery of costs under the TAG scheme.
Regulation 4 of the Conditional Fee Agreements Regulations  states that a legal representative must explain aspects of the agreement to the claimant. But under the TAG scheme, a TAG employee not a solicitor gives the explanation.
A group of liability insurers has argued that they were not liable for solicitors' costs where the advice was given by a third party.
Master Hurst said delegation by the legal representative, either internally or to a duly appointed agent like a claims company representative, was permissible.
The ruling took 18 TAG test cases into consideration where insurers claimed the CFA was unenforceable.
The decision means the insurance industry could face a legal bill in excess of £1bn, legal sources suggest.
Partner at Manchester law firm Rowe Cohen, which acted for TAG, Anthony Dennison said: "I would hope that in spite of the fact that they are considering appealing, they will accept the senior costs judge's decision.
"These agreements govern the relationship betweeen a client and solicitor and it's high time insurance companies looked at pragmatic, as opposed to technical, points."
Nick White of Beachcroft Wansbroughs, who acted for one of the defendants said the decision "struck us as being wrong".
He said: "If the delegate is required to act with skill and discretion, it should be someone with the relevant skill. This is the backbone of our grounds for appeal."
White said further issues to be decided on in the TAG case included other compliance issues and questions surrounding the true amount of the premium.
Arriva's group insurance manager Kath Taylor said the company has begun investigating all claims received from TAG in March this year.
Once the investigation was launched, Arriva said 51 claimants withdrew and 113 were uncontactable at their addresses. A number of cases have been passed to the police.
TAG founder Mark Langford could not comment on the claims as the company had not investigated them. But he said he was happy to talk to investigator Bob Barnett from Ravenstone about the situation.
Barnett is part of the Arriva investigation and has been employed by various bus companies to investigate claimants.