Personal Injury: Adding Insult

Ongoing controversy over the alleged mishandling of the record-breaking miners' compensation scheme is the latest blow to personal injury lawyers in the UK.

It was not so long ago the national press was littered with eulogistic articles celebrating the achievements of those elite City lawyers — an estimated 400 at the last count — whose annual pay routinely tops seven figures.

The generally congratulatory nature of the coverage demonstrates an ongoing fascination in the media with the opaque goings-on of the legal profession in the UK. Yet the relationship is a strangely paradoxical one.

Corporate hotshots are feted for maximising the earnings of some faceless multinational client or other, while personal injury (PI) lawyers specialising in protecting the individual are routinely decried for their opportunism and cynicism.

Similarly alarmist coverage, meanwhile, continues to fuel the myth of a ‘compensation culture’ spiralling out of control, despite the falling number of claims seen in recent times — a situation which obviously suits insurer defendants.

While few practising lawyers may genuinely consider themselves selfless crusaders championing the rights of workers and consumers, rarely are most of the ‘ambulance chasers’ rightly lambasted for excess litigiousness.

The most recent blow — and arguably the most significant yet — to the reputation of PI lawyers in the UK comes with controversy mounting over the alleged mishandling of compensation awarded to sick miners by the Department of Trade and Industry.

The £7bn compensation package was awarded to miners suffering a range of crippling hand injuries and respiratory illnesses and is thought to represent the largest such compensation scheme in the world.

However, PI lawyers and the Law Society have come in for fierce criticism over their roles in the scandal, which is now the subject of a full-scale criminal investigation.

Controversy centres on allegations that a clutch of law firms deducted success fees or ‘administrative’ costs from payments to miners, despite earlier promises from the Government that it would meet all advisers’ costs in successful claims — meaning some firms could have effectively double-charged for the same work.

While an ongoing police inquiry into the matter has yet to reach its conclusion, meaning few definite conclusions can yet be drawn, MPs have not been slow to criticise the conduct of lawyers representing some of the claimants.

One disgruntled PI lawyer complains that MPs — some of whom have close links with the unions involved in the scandal — have taken advantage of the legal privilege accorded by parliamentary status to make sweeping and unsubstantiated accusations about the conduct of lawyers representing claimants in the scheme.

While the scandal would hardly represent the first occasion on which MPs have looked to gain political capital from a high-profile controversy, PI lawyers nevertheless feel they have been unfairly singled out for some particularly bad press.

"There is lots of political activity, and there are lots of agendas out there — and this is an opportunity to pursue those agendas," argues one PI lawyer close to the proceedings, pointing to longstanding antipathy between rival trade unions and the reduced influence of the unions generally as added sources of political tension. "There are anti-lawyer agendas, access to justice agendas [and] axes to grind with unions and solicitors."

Richard Langton, a PI partner at insurance specialist Russell Jones & Walker and president of the Association of Personal Injury Lawyers (APIL), argues that while a handful of firms may have taken advantage of their position, the scale of any abuse has been exaggerated.

"Only a small number of firms are involved, although a lengthy list was mentioned in Parliament," he argues. "Most [claimants] seem happy in numeric terms… and there has been a disproportionate amount of publicity."

Media interest has been assured, thanks to the sheer volume of claims and the spectacular sums involved. More than 730,000 individual claims, handled by more than 50 law firms, are represented in the multi-billion pound scheme. Law firms, meanwhile, have picked up fees worth hundreds of millions of pounds.

"The numbers are very high," confirms Langton. "If there are 700,000 cases and billions of pounds in damages, there are potentially very large numbers involved. But people are extrapolating that upwards and the implication is that millions of pounds may have been squandered. However, the two do not add up."

Just as lawyers understandably look to play down the scale of the problem, so any investigation finding that misconduct was rare will be accused by some of lacking rigour.

"As I understand it, some repayments [from firms to claimants] have been made," says Langton. "At APIL we want charging to be fair and transparent."

Lucrative business

Among those firms coming under intense scrutiny has been Thompsons, a firm widely regarded as the leading trade union adviser in the UK. In May, it emerged that the national litigation specialist had to date received £83.7m in fees resulting from its work handling thousands of claims — fees paid for with public money.

The windfall represents one of the largest payouts in legal fees ever received by a UK law firm for a single matter, exceeding — by comparison — even the £75m doled out to Freshfields Bruckhaus Deringer for its involvement in the famously lengthy BCCI-Bank of England trial.

Three-partner Doncaster firm Beresfords, meanwhile, also did rather well from the scheme, seeing its coffers swell by £66.7m after handling almost 81,000 separate claims.

Earlier this year the Legal Services Ombudsman, Zahida Manzoor — the legal profession’s most senior watchdog and a regular critic of the Law Society — attacked solicitors for failing to represent the best interests of their clients, questioning "why miners were asked by their solicitors to make payments to a claimshandling agent when the Government would have covered all such costs".

In a special report, released in April, she also lambasted the "inadequate" Chancery Lane investigation into the affair, suggesting the Law Society had pressured claimants, had failed to properly investigate each case on its merits and had not considered whether fees obtained by claimants’ firms should be returned to the miners.

"I am not satisfied that the Law Society could conclude that the service provided by the solicitors was satisfactory or that there was no misconduct on the part of the solicitor," added Manzoor. "I have returned these cases to the Law Society and recommended that the Law Society re-investigates them quickly."

In response, the Law Society defended its own handling of the situation by saying that it had completed some 700 of 1,000 complaints it had received over the scheme — representing its most significant ever probe into the conduct of UK lawyers — with just 12 complaints subsequently referred to the Ombudsman. The society did also voluntarily waive its usual requirement that complaints be brought within a set period of time after the event.

Ongoing inquiry

At the latest count, the ongoing inquiry had led to the referral of 45 solicitors to the Solicitors Disciplinary Tribunal, although the first such hearing relating to the scandal was only scheduled to begin last month.

The sheer scale of the compensation package means the circumstances surrounding the controversy are unlikely to be repeated. However, the current difficulties engulfing the profession are surely indicative of a more challenging commercial environment for PI lawyers around the UK.

"Claimant PI has been challenging from a business perspective for a very long time," says Langton. "There has been uncertainty since Access to Justice [in 1999] and claims management companies coming into existence. That has put a lot of pressure on business models."

A growing tendency towards the early settlement of many claims following the Woolf reforms and the sub-sequent advent of the Civil Procedure Rules means that a fall-off in general litigation cases going to trial has been mirrored in the PI sector.

Claimant work in ‘crisis’

"Claimant work is pretty parlous," says Jason Rowley, managing partner of Vizards Wyeth — which specialises predominantly in defendant work — and himself a PI specialist. "There is nothing to show there is a compensation culture [and] claims are actually going down.

"The question is where you get the cases from, and television adverts have not really helped. There is a bit of a crisis in terms of getting the work in the first place. If you were starting a firm up from scratch, you would not do claimant work."

Meanwhile, insurance companies have successfully put the squeeze on defendant practices, with formalised panels helping to maintain downward pressure on fees, making it more difficult then ever for smaller practices to compete on price.

One barrister specialising in PI work admits to feeling "slightly vulnerable" in the current climate, laying the blame for the negative publicity squarely with claims handlers, some of which have profited handsomely from work on trade union-assisted compensation schemes.

"The problem is not so much the lawyers as the intermediaries — the claims handlers," he argues. "The issue which crops up is that of a ‘compensation culture’, which has seeped into not only how courts deal with costs but also with liability issues.

"Circuit judges are increasingly unsympathetic — imagine a claim for £1,000-£2,000 where the costs are £6,000. The real problem is with staged uplift agreements, where solicitors are not just recovering costs but getting a 100% uplift as well. You can understand why insurers are getting irate."

Advisers have faced growing criticism of their handling of PI claims since legal aid for PI cases was abolished in favour of conditional fee arrangements (CFAs) in the late 1990s — an innovation initially opposed by the Law Society. CFAs have been subject to continual revision ever since.

"In a way, this has been forced upon us," according to the counsel. "No one wanted CFAs to be introduced, especially at the Bar. It is easier for firms of solicitors to recover their costs than barristers, who are essentially sole practitioners and must be more cautious [about the cases they take on].

"The Bar Council would prefer barristers to act as an independent voice, giving an impartial steer, but that has not happened."

He adds: "The irony is that all the evidence shows the number of claims have reduced. One reason is that neither counsel nor solicitors want to bring spurious claims; the ones that go to court are those that are thought likely to succeed. So rather than promoting spurious claims, CFAs actually filter them out."

Rowley agrees that CFAs are not to blame for problems facing the sector.

Ambulance chasing

"Everyone, particularly insurers, is worried about the ‘ambulance chasing’ aspect," he says, "[but] I do not think the introduction of CFAs has made any difference — that is something of a red herring. PI lawyers are not going to take on ‘wing and a prayer’ cases.

"That would make for a strange business model. The only difference CFAs might have made is in some claimants thinking they will never have to pay anything… so claimants might be keener to bring cases, but not advisers.

"The problem with uplifts is that if the uplift is, say, £3,000 and the damages awarded are just £2,000… the uplift always outweighs the damages."

He adds: "The whole idea of making success fees recoverable belonged to the Government. It was something no-one else wanted."

Rowley argues that alternatives to basic cash settlements could improve public perceptions of PI lawyers, although he recognises that it is easier for firms to demonstrate their usefulness to prospective clients by pointing to a hefty lump sum rather than a programme of rehabilitation, however effective.

"Rehabilitation does mean you can offer something other than just money," he comments.

"It would be a better selling point for PI lawyers, [and] moves are afoot from the insurance industry to channel money they are currently giving to the Government [for compensation schemes] directly to hospitals. It is a nice idea… but it is going to take a very long time to happen. It is also very difficult to show conclusively that it saves you money."

Whatever the causes, PI lawyers have much to do to restore public confidence.

"All this has done reputational damage to the legal profession generally and to PI as well," admits one senior lawyer in the sector. "Whether the criticism is fair and reasonable — some of it is and lots is not."

source: LegalWeek.com (Last Updated: Thursday, 6th July, 2006)

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