In dismissing the appeal by Norwich Union to the Court of Appeal's judgment in the case of Callery v Gray, the House of Lords has opened the floodgates to claims held up by the case, reports Christine Seib
The House of Lords has thrown out Norwich Union's (NU) Callery v Gray appeal, opening the way for "tens of thousands" of cases held up by the appeal.
Claimant solicitor Amelans Solicitors said "thousands" more proceedings would be issued on behalf of injured people now the case has been settled.
However, NU said it would continue its fight to contain costs for consumers with further legal actions.
In July 2001, the Court of Appeal found that a claimant could enter into a no win-no fee agreement with a solicitor as soon as the solicitor was instructed and buy insurance that gave protection against the other side's costs.
The court found that a reasonable premium for such cover was £350.
NU appealed the decision, on the basis of the timing of taking out the conditional fee agreement (CFA) or after-the-event (ATE) cover and the assessment of the level of success fee and reasonable ATE premium.
In last week's finding against NU, the House of Lords commented on the lack of competition in the market and the scope for abuse of the system.
However, the Lords said the Court of Appeal "couldn't have been better informed" and its judgment was "entitled to the greatest respect".
The Lords dismissed any further appeal by NU.
Beachcroft Wansbroughs acted for NU on the case. Litigation partner Andrew Parker said it was disappointing that the 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 said the Lords' decision would allow "tens of thousands of accident victims around the country to sleep easier in their beds - hospital or otherwise".
"Had the House of Lords decided differently, there would have been chaos, in which only the big insurance companies would have benefited," said partner Andrew Twambley.
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 thousands more proceedings on behalf of injured people," he said.
NU refuted the accusation, saying it had reserves for all of its current outstanding cases and was merely trying to keep legal costs to consumers as low as possible.
The case to date
The Callery v Gray case revolved around a two-vehicle collision in April 2000, in which the claimant Callery, a passenger in one of the cars, was injured. NU, Gray's insurers, admitted liability and paid Callery £1,500 for his whiplash claim.
Callery had taken out an ATE policy and CFA with a success fee, but his solicitors and NU could not agree the costs. The claimant's solicitors then issued costs-only proceedings.
The costs assessment by the District Judge was appealed by
NU in the Circuit Court, then the Court of Appeal and finally the House of Lords.
Legal experts argue the merits of the case
"Everyone at Amelans, who fought this case from the beginning on behalf of all injured claimants, was relieved that the case had been concluded. This has been a long, hard-fought battle. The sun has shone on the righteous and the substantial groundwork put in by the government, the courts and claimants' lawyers can now continue to develop."
Andrew Twambley, partner,
"The effect of the decision is that, in the absence of legislative or regulatory intervention, it is inevitable that we will see further litigation. That is not the certainty that either side needs."
Andrew Parker, litigation partner, Beachcroft Wansbroughs
"The main disappointment is not so much with the result, especially as there is much said in all of the judgments to explain exactly why defendants have found this costs regime so unsatisfactory, but with the lack of any certainty as to the way forward."
Tim Wallis, president, Forum of Insurance Lawyers
"Despite the dismissal of our appeal, there are clear signs that the House of Lords accepted the need for review. For instance: the widespread acceptance by the Law Lords that the system is not right, the acknowledgement that legal fees on straightforward cases are disproportionate, the recognition of the need for the Civil Justice Council to continue looking at fixed fees, the effective invitation of further test cases to provide certainty [and] the need for a review of legislative and regulatory measures to curb excess."
Official statement, Norwich Union
"The House of Lords judgment in Callery v Gray provides welcome clarification for accident victims seeking access to justice through conditional fee agreements."
Official statement, Association of Personal Injury Lawyers