No win no fee claims - is there a catch?
Conditional fee agreements or No win No Fee agreements are the norm when it comes to funding personal injury claims - but are they all the same, is there a catch and is it worth shopping around before instructing a solicitor?
No Win, No Fee Agreements can vary considerably
There are several key areas in which No Win, No Fee Agreements can differ. The following explains these differences and how they can financially impact claimants:
Hidden and unexpected Fees
Some No Win, No Fee Agreements only cover the solicitor's fees. Costs that are not covered might include medical expert fees, Barrister's fees or the costs of the other side's solicitors as they defend the claim. These costs can run into thousands of pounds.
A surprising example of such a hidden fee can occur when a solicitor advises the client to drop a case and the claimant 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.
Other 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
Quittance's panel of solicitors do not include any additional fees in their Conditional Fee Agreements.
Inflated 'After The Event' or 'ATE' insurance premiums
In conjunction with the Conditional Fee Agreement, most solicitors will require claimants to take out an 'After the Event' or 'ATE'' insurance policy before they start work on the case. If the claimant is not covered by ATE insurance and the case is unsuccessful, then he or she 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.
At the time of writing, some solicitors would expect claimants to pay as much as £985* for an ATE insurance policy on a deafness claim
An ATE insurance policy through Quittance on the same claim was quoted at £65*.
The cost of ATE insurance policies available to individual solicitors is linked to their track record of winning claims. The better the solicitor's record of winning claims is, the lower the ATE premiums will be. The insurance company recognises that there is a smaller chance that they will need to pay out on a policy sold to clients of that solicitor.
Quittance's solicitors are chosen based on their exceptional claims record. This means they can access very low premiums.
Claimants do not recover the cost of the policy if the case is won. The cost of the policy, including any referral fees, will usually be deducted from the compensation award.
Paying more for ATE insurance does not mean it is a better policy
Some firms do not have access to lower rates based on their less-successful 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 cover also differs. At the time of writing the cover offered for identical accident claims varied from £25,000 to £100,000, with the cheapest policy offering the highest level of cover. This is because of the success rate of companies able to access those policies.
Unreasonable solicitors costs
Solicitors can reasonably expect to be paid for the work they do. However, some Conditional Fee Agreements contain complicated remuneration mechanisms in the small print that can surprise the unwary.
Fees typically break down as follows:
Solicitors' fees tend to be accrued at an hourly rate. However, under a No Win, No Fee Agreement claimants should not have to pay these fees as:
- if the case is lost the solicitor should not charge any fees
- if the case is won the solicitor's fees should be paid by the defendant
However, if the other side believes 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 agreement, the claimant may then have to make up the shortfall.
It is estimated that on average the Courts reduce the solicitors fees by around 30%. This means that unless claimants have a conditional fee agreement preventing recovery of the excess solicitors fees, claimants could see further deductions from their compensation.
Quittance's solicitors will only charge the amount that can be recovered from the other side. This is clearly set out in the No Win, No Fee Agreement.
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.
Success fees are capped by the MOJ at 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.
The majority of personal injury cases are settled by insurance companies outside of Court.
There is always a chance that a case may go to Court however. As most solicitors in the UK do not 'advocate' on behalf of clients, representing clients in Court, it would be necessary to instruct a barrister.
Barristers' fees can be very expensive and No Win, No Fee Agreements entered into with the solicitor only cover the solicitor's fees.
Quittance's solicitors only work with barristers prepared to represent claimants on the basis of a separate No Win, No Fee Agreement.
Our No Win, No Fee Approach
Quittance believe that the personal injury system in the UK is unfairly skewed against accident victims. Relatively low compensation awards (as determined by the JSB) are further eroded by inflated success fees as solicitors attempt to recover some of the costs of expensive TV advertising campaigns.
For more information read about our No Win, No Fee approach or call us on 0800 612 7456.
* Premium comparison obtained on 22 April 2015. Templeton Insurance premium quoted at £985 compared with Temple Legal Protection who quoted £65 for the same case.