No win, no fee injury claims - is there a catch?

Conditional fee agreements (no win, no fee agreements) are the default way to fund a personal injury claim. But are no win, no fee agreements all the same, is there a catch and is it worth shopping around before instructing a solicitor?

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No win, no fee agreements vary considerably

There are several key areas in which no win, no fee agreements can differ. The following article explains these differences and how they can financially impact you as a claimant:

Hidden and unexpected fees

Some no win, no fee agreements only cover the solicitor's legal fees.

Costs that might not be covered by the agreement include medical expert fees, barrister's fees, and the legal fees of the defendant's solicitors. These costs can run into thousands of pounds.

One example of a hidden fee is when a solicitor advises the client to drop a case, and the claimant subsequently chooses to pursue the case with a different solicitor. If the second solicitor wins the case, the claimant may then find themselves liable to pay a success fee to both the original solicitor and subsequent solicitor.

With some no win, no fee agreements additional costs may apply if:

• the solicitor advises acceptance of a settlement offer but the claimant refuses
• the claimant decides to settle out of court, contrary to the solicitor's recommendation
• the claimant refuses to co-operate with the solicitor in some other way
• the other side is ordered to pay costs but cannot afford to

Inflated 'After The Event' or 'ATE' insurance premiums

In conjunction with the Conditional Fee Agreement (CFA), most solicitors will require claimants to take out an After the Event (ATE) insurance policy before they start work on the case.

If you don't have ATE insurance and your claim is unsuccessful, then you would have to pay the defendant's costs.

As with any insurance policy, the cost of ATE insurance for a given claim can vary enormously between solicitors.

ATE policy costs are linked to the solicitor's track record

The cost of ATE insurance policies available to individual solicitors is linked to the solicitor's track record of winning claims. The better the solicitor's record of winning claims is, the lower the ATE premium will be. Insurance companies recognise that there is a lower probability of paying out on a policy sold to clients of a solicitor with a better track record.

Who pays the ATE insurance premium?

If you don't win your claim, you will not have to pay for the policy.

If you do win, the cost of the policy (plus any referral fees), will usually be deducted from your compensation award.

Paying more for ATE insurance does not mean it is a better policy.

Some firms don't have access to lower rates due to their poor claims record.

Some companies earn referral fees from selling ATE insurance. Both of these factors can inflate the cost of the ATE insurance premium but have no bearing on the level of cover provided.

The level of ATE cover can differ significantly

At the time of writing the cover offered by different solicitors for identical claims varied from £25,000 to £100,000, The cheapest policy actually offered the highest level of cover! This is because of the differing track records of the solicitors able to access those policies.

Unreasonable solicitors costs

Solicitors can reasonably expect to be paid for the work they do. However, some CFAs contain complicated remuneration mechanisms in the small print, which can surprise the unwary.

Fees typically break down as follows:

Basic fees

Solicitors' legal fees are traditionally accrued at an hourly rate. However, under a no win, no fee agreement claimants should not have to pay any legal fees if the case is lost. If the case is won the solicitor's fees should be paid by the defendant.

However, if the defendant believes that the claimant's solicitor's fees are unreasonably high, they may challenge them. If the court agrees, it may decide that the defendant does not have to pay the full amount. Depending on the terms of the CFA, you might have to make up the shortfall.

It is estimated that, on average, the courts reduce the solicitor's fees by around 30%.

This means that unless claimants have a CFA preventing recovery of the excess solicitor's fees, claimants could see further deductions from their compensation.

Success fees

In addition to the solicitor's fees, most firms charge a success fee. This is an additional amount payable to the solicitor if they win the case.

The Ministry of Justice (MOJ) restricts success fees to a maximum of 25% of the compensation award. Most firms charge their clients the maximum success fee of 25%.

Before signing a no win, no fee agreement, claimants should be clear about what percentage of their compensation award will be paid to the solicitor as a success fee.

Read more:

Why do most solicitors charge a 25% success fee?

Barristers' fees

Insurance companies settle the majority of personal injury cases outside of court.

Approximately 5% of cases go to court. As most solicitors in the UK do not 'advocate' on behalf of clients, it would be necessary to instruct a barrister.

Barristers' fees can be costly and some no win, no fee agreements only cover the solicitor's fees.

See also:

How often do injury claims go to court and what if they do?

In summary

Most no win, no fee agreements are drafted within the spirit of getting the best possible outcome for the claimant. However, you should always read the small print carefully before instructing a solicitor.

Author:
Helen Goddard, Legal researcher

About the author

Helen is an award-winning legal researcher and author. She is an experienced court litigation report proofreader and has written extensively on legal matters.