The House of Lords has found against Norwich Union's (NU) appeal on Callery v Gray, confirming the decision of the Court of Appeal but expressing concern at the scope for abuse the decision offered.
The Court of Appeal decided in July 2001 that a claimant could enter into a no win-no fee agreement with a solicitor as soon as the solicitor was instructed, the claimant could buy insurance that gave protection against the other sides' costs and a reasonable premium for such cover was £350.
Norwich Union had appealed the decision, on the basis of the timing of taking out the conditional fee agreement (CFA) or after the event (ATE) cover, the assessment of the level of success fee for a small road accident case and the assessment of a reasonable ATE premium.
In its finding, the House of Lords commented on the lack of competition in the market but said the Court of Appeal "couldn't have been better informed".
It has dismissed any further appeal by Norwich Union.
Beachcroft Wansbrough acted for Norwich Union on the case.
Its litigation partner Andrew Parker said it was disappointing that the House of Lords recognised the problems inherent in the Appeal Court judgment but did not intervene.
"The effect of the decision is that, in the absence of legislative or regulatory intervention, it's inevitable we'll see further litigation," he said.
"That is not the certainty that either side needs."
However, Amelans, who acted for the claimant, said the Lords' decision would allow "tens of thousands of accident victims around the country to sleep easier in their beds".
"Had the House of Lords decided differently, there would have been chaos, in which only the big insurance companies would have benefited," partner Andrew Twambley said.
He accused the insurer of holding up the justice process.
"Norwich Union, seeing a potential drain on their funds, decided to appeal the decision, thus holding up tens of thousands of more proceedings on behalf of injured people."
