Solicitors could face higher rates as costs appeal rejected by the courts

The ‘Plebgate’ libel case could lead to increasing professional indemnity insurance premiums for solicitors after MP Andrew Mitchell’s appeal against cost limitations was rejected.

Mitchell had appealed against a court order limiting his legal spend to just £2,000 after his legal team missed a deadline for filing a cost budget with the court, a new requirement of last April’s Jackson reforms.

However, the appeal was rejected by the Court of Appeal, with the Jackson reforms putting greater pressure on courts not to offer leniency to missed deadlines.

This meant that the £589,588 cost budget put forward by Mitchell’s legal team could not be recovered, presenting the former chief whip with a hefty legal fee and the possibility of claiming against his solicitors.

Law firm Stevens & Bolton partner Michael Frisby said the rejection of this appeal could make solicitors who perform litigation a riskier proposition for insurers.

“His solicitors will have charged him as they’ve been going along and now he, having expected to recover a substantial portion of his costs, is going to recover next to nothing,” he said. “That’s going to cause some tension between Mr Mitchell and his lawyers and ultimately could cause a claim.

“If you look at it from a professional indemnity insurance perspective, it just means that all of a sudden, in light of this decision, if the courts are now adopting this approach there is real risk associated with law firms carrying out litigation if they don’t meet court dates.”

Frisby added that this could result in an increase in professional indemnity insurance claims.

“Professional indemnity claims may increase (at least in the short term) as solicitors get to grips with the new approach,” he said. “Those that do not may find professional indemnity insurance harder to come by. Smaller firms with overstretched or limited resources may be viewed as much higher risk in future. Satellite litigation may in fact emerge as professional indemnity claims.”

James Field of Triton Legal in Birmingham said the ruling may also lead to larger claims being made against solicitors and higher premiums as a result.

“Negligence claims can be expected to be for bigger amounts than before,” he said. “Previously, the quantum of negligence claims relating to procedural errors were often restricted to the limited cost of a court application to put matters right. From now on lawyers and their insurers can expect to pay more in compensation for negligence claims arising out of litigation errors.

“It may be that the Mitchell decision will make firms with a litigation department a less attractive risk. Firms could see their insurance premiums increase from next renewal to reflect this. It may be that a litigation firm’s diary systems will be under even more scrutiny than before from insurers, and brokers may face difficulty placing insurance for firms whose systems are not sufficiently robust.”