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Referral Fees and Personal Injury Claims

The Ministry of Justice have decided to have a stamp down on referral fees in personal injury claims. Referral fees for a personal injury case or leads have been paid to Insurance Companies and Claims Management Companies for many years. This comes as good news, particularly for consumers, but also for many personal injury solicitors who have been concerned about these set-ups for some time.

It is fair to say that the media portrayal of the so-called compensation culture does the reputation of the legal profession in general no favours at all. However it doesn’t reflect the nature of the vast majority of cases we see, where the client has suffered genuine injury and really needs our help. Often clients lose their livelihood, or need extensive care, as a result of an unexpected accident.

We agree with the view of the Ministry of Justice, that the system of referral fees does nothing for the consumer who has inevitably ended up paying more for their insurance, but more than this, it benefits only the middle man and is not in a client’s best interests.

Cold Calling?

A good few of us have probably been subject to cold calling or text messages from unscrupulous claims management companies. Not only does this exacerbate the problems with the referral fee system, but selling personal details without a customer's permission is in fact illegal under the Data Protection Act.

An insurer who wants to pass a client's details onto a law firm must say upfront they have such an arrangement in place, and give the insured the option to opt out. However, probably few of us realise when we buy insurance that such an agreement is often buried in the policy's terms and conditions, and even where this isn’t the case, there have still been companies contacting consumers in complete breach of the Data Protection Act.

Genuine claim and can I use my own solicitor?

Where insurance is in place, often clients will be made to use the insurer’s panel solicitors without being clearly told if and when they are free to make a choice to use their own solicitor.

The usual procedure of insurers is to refer claimants to their panel solicitors following an accident. This is why people get letters from lawyers the day after an accident in which they have been involved. The insurers are of course usually incentivised to do so by the payment of a referral fee, or the costs agreements they have with their panel firms. These panel firms are not always the ones with the best reputation and expertise to deal with the claim, particularly if it’s a serious injury. They may not allocate the case to a sufficiently experienced lawyer or contact, and knowledge of local service providers may be difficult because the firm are many miles from the injured claimant.

What many claimants don’t realise though is they are able to request their insurers allow them to use their own choice of solicitor, with the insurers paying the costs of that chosen firm. Regulation 6 of the Insurance Companies (Legal Expenses Insurance) Regulations 1990 ('the Regulations'), specifically provides for claimants to exercise their own choice of lawyer. This regulation is frequently interpreted as meaning that the insured has a right to choose his or her lawyer at the moment when proceedings are issued, but not earlier, meaning that at least initially claimants are referred through to the panel firms of the insurer, but there is case law which challenges this position. Your chosen solicitor may be able to offer you a suitable alternative way of funding your case. You should carefully select your solicitor based on recommendation, quality marks and experience.

Should you have a query, or on any of the above, then please contact us.

Lanyon Bowdler specialise in Personal Injury Litigation.