Are no-win, no-fee claims a thing of the past?


In April this year the Government’s crackdown on so-called ‘ambulance chasers’ came into force. The measures contained in the Legal Aid, Sentencing and Punishment of Offenders Act were designed to “turn the tide on Britain’s compensation culture”, according to Justice Secretary Chris Grayling.

What was the issue?

The Government believes that the ‘compensation culture’ is behind the £1 billion paid out by the NHS in damages per year. It also believes it is behind the rising cost of car insurance, as insurers have to charge higher premiums to cover the number of personal injury claims made after accidents - in particular, whiplash claims.

What did the Government introduce?

There were two main measures introduced by the Government to tackle these problems.

  • The first was banning ‘referral fees’ – payments from solicitors to those who provided them with details of accident victims
  • The second was that the success fee paid to solicitors when they win a claim they have taken on under a no-win, no-fee agreement can no longer be paid by the defendant. Success fees are now payable by the claimant and are capped at 25% of the total damages

What are the early signs?

So have the new measures had any success? Well according to official figures released by the Ministry of Justice on 23 July, they have already succeeded in cutting the number of claims management companies by 30%. There are only 1,700 claim management companies registered now, down 735 from March 2012. In addition, the Ministry of Justice has investigated 141 firms, closing four that were operating without a licence.

Whilst this sounds positive, are the measures themselves a good thing? While everyone would welcome cheaper car insurance and more money being spent on improving the NHS instead of paying out damages, do the new measures put genuine claimants at risk?

What are the issues?

The feedback from personal injury solicitors is that the curbing of the success fee and the fact that it will only be recoverable from the claimant mean that they will be less willing to take on those clients whose chances of success are slim. This could mean claimants with genuine but complex claims could see their recourse to justice disappear as they will be unable to find representation.

Another drawback for the claimant is that the damages they do receive may be cut by up to 25% as they will now have to pay the solicitor the success fee out of their own pocket, as opposed to the defendant paying the success fee as was previously the case.

The banning of referral fees will likely be welcomed by law firms as it will mean fewer cold-calls. This is however, based on perspective. Clients need access to help, and sometimes claims management companies are best-placed to offer this.

Early conclusions

So are no-win, no-fee claims a thing of the past? Hopefully not. While terminology like ‘ambulance chasers’, ‘cash for crash’ and ‘compensation culture’ may imply no-win, no-fee agreements are simply a way of getting money for nothing, in actual fact they allow many people with genuine claims who cannot afford legal help to get the compensation they deserve. Anyone who has suffered from whiplash knows what a pain in the neck it is, and therefore compensation is a reasonable demand.

Whilst it may be harder to find a solicitor willing to take on a personal injury claim on a no-win, no-fee basis and your damages may be reduced by the payment of a success fee, if you have a genuine personal injury claim it is still worthwhile talking to a solicitor. No-win, no-fee is still available for personal injury claims and a solicitor will be able to tell you if your claim is suitable for one.

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