Royal & Sunalliance (R&SA) is considering offering before the event cover as a standard feature to its 3.7 million motor policyholders following a pivotal legal ruling by the Court of Appeal.
Lord Woolf, the architect of the civil justice reforms, presided over the case, which promises to unlock more than 100,000 personal injury cases left stranded in the courts system because of uncertainty over the recoverability of costs in conditional fee agreements (CFAs) and after the event (ATE) legal policies.
He dismissed appeals from Norwich Union and R&SA to restrict the level of success fees solicitors can recover for successful personal injury claimants in motor cases to less than 20%.
The court said where a CFA was agreed at the outset of such cases, 20% should be the maximum level of success fee. Woolf also said it was reasonable for claimants to take out a CFA and ATE legal cover before legal proceedings were initiated.
The Court of Appeal passed the separate issue of what is a reasonable premium for ATE policies to costs judge Master O'Hare, who is to report in two weeks.
The appeal hearing examined the reasonableness of success fees in two separate motor accident claims, one for 30% and another for 60%, both of which were later reduced to 20% on appeal.
Commentating on the ruling, R&SA said: “We are considering the possibility of making before the event legal expenses insurance for personal injury available to all our personal customers [including 3.7 million motor policyholders].”
The insurer added: “The provision of this cover is not intended to conflict with wider uninsured loss recovery products available to RSA and others in the financial services market.”
Norwich Union, however, welcomed the court's decision to apply a maximum 20% cap on solicitor's success fees.
A spokeswoman for the insurer said: “This represents a considerable restriction, as a 60% increase had originally been claimed in our case. But we will be monitoring the impact of the decision, as the court itself clearly envisages further change in the future.”
The Forum of Insurance Lawyers (Foil) does not believe the case has clarified the issue of success fees, because the court has proposed the introduction of a two-stage success fee. This would start at 100% and reduce to 5%, should the claim be settled within a three month period.
Chairman of Foil's cost special interest group, Jason Rowley, said: “The success fee ruling is disappointing – there will be much argument about the introduction of a two-stage success fee alongside a 20% maximum fee in road traffic accident cases. It poses more questions than it answers.”
But treasurer for the Association of Personal Injury Lawyers (Apil), David Marshall, believed the judgment has brought greater clarity: “The uncertainty surrounding success fees is ended. Claimants can sign up for CFAs from day one without worrying about the cost of their case.”