What are the financial aspects of instructing a solicitor in relation to a personal injury claim?
When it comes down to it, personal injury claims are about money. That may not be the most important thing to you but it is the way the law looks at these claims.
Accordingly, your solicitor’s main aim is to maximise the amount of financial compensation you will receive.
In practice, there are two aspects to the amount of compensation you receive.
In the first place, it’s about maximising the amount of money which is paid out by the other party (or, in the vast majority of cases, their insurers). This includes making sure that all the different types of loss you have suffered are claimed for and nothing is missed out. It also means countering any arguments that you were partly (or even wholly) to blame for your accident (which might reduce the compensation payable to you by a percentage – or totally).
The second aspect is about minimising the amount of legal costs or other fees you will have to pay out from the compensation you receive. We sometimes refer to this as the potential “hidden cost” of a personal injury claim. We generally manage to run claims in a way that means our clients receive 100% of their compensation, without deduction.
In tandem with maximising the amount of compensation you receive, there’s another very important matter.
We also have to take steps to minimise the financial risks to you (and to us, where possible) as your claim proceeds.
While there is no financial risk to you at the negotiation stage of a claim, if it becomes necessary to raise a court action, there is always a risk of “losing” and, if that happens, you could theoretically be responsible for thousands of pounds of costs incurred by the other side.
The different ways of running personal injury claims address the “insurance” against this financial risk in different ways.
The 3 options we offer, for example, are as follows:
1. Legal Aid
Eligibility for legal aid depends upon your financial circumstances. If you are married or living with someone, their financial circumstances will probably have to be taken into account as well.
In very broad terms, if your household has net weekly income in excess of £250 or your savings (including those of a spouse or partner) exceed £2,000, you probably will not qualify for the initial type of legal aid, which is known as advice and assistance (which covers the initial, negotiation stage of a claim).
Each case has to be individually assessed because there are a number of quirks in particular circumstances. For example, the financial eligibility regime is more generous to people who are over retirement age.
If it becomes necessary to raise a court action to progress the claim, we can apply for civil legal aid. This requires a separate and more detailed financial assessment, which is made by the Scottish Legal Aid Board itself rather than by your solicitor.
In cases where a person qualifies completely for legal aid, without any financial contribution being payable, it is a very effective way of reducing risk not only for you, the client, but also for the solicitor.
Insurers know that a legally-aided claimant will usually have their liability for court costs restricted to the level of their civil legal aid contribution (which may be nil). Accordingly, in many situations, insurers are looking at footing the bill of defending a court action where the pursuer has legal aid, whether the insurer wins or loses. This factor can be a powerful negotiation weapon for an injured person who has civil legal aid.
The main drawback with legal aid is that most significant outlays require prior approval from SLAB and this can result in delay. However, we do not usually find this to be much of a problem in practice and the legal aid board increasingly have moved to a system whereby the authorisation of many commonly-required outlays (e.g. for medico-legal reports) is fast-tracked.
You can self-assess whether you might qualify for legal aid, using SLAB’s online Eligibility Estimators.
2. Legal Expenses Insurance
People commonly have this type of insurance as an add-on to other insurance such as buildings or house contents insurance. It is always worth checking these policies to see if such assistance is available.
If such insurance exists, the insurance company will invariably tell you that cover will only be made available under the policy to their own nominated solicitors. However, that is only true at this stage where the claim is still being negotiated, prior to any court action.
As indicated above, there is no financial risk at the pre-litigation stage, so whether the insurance is in place or not does not really matter.
It is crucial that any insurance of this nature is operative at the litigation stage, however, but provided your solicitor has sufficient experience and expertise (for example, accredited specialism in personal injury law via the Law Society of Scotland scheme) the insurers will have to agree to allow them to act.
The benefit of being able to choose your own solicitor is that you will be able to have someone who is local to you and you can meet face-to-face. They may also be local to the place where you suffered your accident and have local knowledge of that as a result. Any solicitors appointed by the legal expenses insurers will almost certainly not be close at hand and will not have the same degree of local knowledge.
Legal expenses insurers will generally have conditions in their policies that substantial outlays require their prior permission before being incurred. They will also have reporting obligations on your solicitor to keep them up-to-date with the progress of the case. As with legal aid, the requirement to get permission at various stages can cause delays.
We would say that the main point to take away from this is that your insurers will put significant pressure on you to use their own solicitors. This is understandable because they will probably already have a working relationship with those solicitors and they may even have an arrangement whereby those solicitors pay to them a referral fee for the business (all things to which your own local solicitor would not be party).
You don’t have to go with the solicitors that the insurers point you to, even if you get the impression from the insurers that you don’t have much of a choice in the matter, if any. You do have a choice.
3. No win – no fee
This is probably the best-known type of feeing arrangement, whereby the solicitor takes the case on and agrees that you will not have to pay anything for the work they do. It is also known as running the claim on a “speculative” basis.
If the claim is successful, the solicitor will be paid for their work – as well as you receiving compensation. If the claim is not successful, the solicitor will receive nothing (and neither will you, but you won’t be due to pay the solicitor anything).
These arrangements vary in the event of success. Some solicitors will allow you to receive your full compensation whereas others will expect to be paid a “success fee” from your compensation.
In the case of legal expenses insurance (2. above), that is known as “before the event” insurance because it is insurance you took out before the “event” in question, namely, your accident. If you don’t have that type of insurance and you don’t qualify for legal aid, the way to cover the financial risk is by “after the event” insurance. In other words, this is a type of insurance which is taken out after the “event”, namely, your accident.
Various international insurance companies offer this type of insurance. Also, some solicitors firms have their own insurance vehicles which will provide the necessary insurance, typically on the basis of an agreement that that insurance company will receive a percentage of your compensation if the claim is successful.
We insure our speculative cases through a UK-based, international insurance company which provides a type of insurance whereby the premium is payable if the claim is successful but, if the claim is not successful, the policy premium is not payable. In other words, the policy premium is “insured”. We usually operate claims in this way on the basis that we will absorb the cost of the insurance premium ourselves, within the fee we receive. We do not ask you to pay the policy premium.
If you’re wondering about how your solicitor gets paid for what they do, if they do not charge you anything, we can explain – or you can find an explanation in this article on our Moray Claims website.
As a general indication, the premium is about £200 in the case of road traffic accidents. For accidents at work, the premium is about £500. These premiums are only payable at the end of the claim once any settlement funds are received. If the claim is not successful, the premium is not payable.
As with legal expenses insurance, we must obtain permission from the insurers before incurring certain types of outlay or outlays above a certain amount.
How we can help
In this article, we have looked at how you should go about choosing the best feeing arrangement for your personal injury claim for compensation.
If you have any questions about the content of this article, please do not hesitate to get in touch. You can contact either of our personal injury solicitors – Peter and Marie – on 01343 544077 or by sending us a Free Online Enquiry. All enquiries are free of charge and without obligation. Your feedback allows us to address gaps in the information provided – or clear up ambiguities – and thereby improve the content on our website.