Wednesday, 11 January 2012

Claimants should be free to bring claims as they see fit


The second reading of the Legal Aid, Sentencing and Punishment of Offenders Bill (LASPO) took place at the tail end of last year. It was accompanied by a number of amendments, tabled by members of the House of Lords. One especially is very welcome: that which seeks to prevent insurers approaching claimants directly.

Lords Thomas of Gresford, Clement-Jones, Carlile of Berriew and Phillips of Sudbury proposed the amendments, which were reported in The Law Society Gazette at the beginning of December. They seek to stop the practice known as 'third party capture', which usually happens in road traffic accident (RTA) cases but could also extend to other scenarios, for example a claim relating to an injury in the workplace.

In a case of third party capture, an insurance company representing the individual who caused a victim's injuries contacts the injured party directly. The injured party is not legally represented, but the insurer goes ahead and settles the claim regardless. Typical incentives to ensure speedy settlement will be phrases like 'If you agree this figure now, I'll have it transferred to your bank account later today' and 'Of course, you're entitled to go and see a solicitor - but we all know how much time they take up, so perhaps you'd like to come to an agreement now so that you can get on with your life?'

Such settlement is intended to be full and final. There's nothing to be done about it once it's been made, and guess what: it's never for the maximum amount that could have been claimed. The whole point of third party capture is to under-settle claims, to the insurer's benefit and to the claimant's detriment.

I do not object to an individual actively choosing to deal with the other side's insurers. If a person makes this decision willingly, that is a matter for them. But what goes on at present is wrong: it is another example of the dysfunction which abounds in the personal injury sector. Indeed, my worry is that the Lords' amendments (to clause 55 of LASPO) do not go far enough. Here's the new clause 55, as proposed by the four Lords:
 
Third party's insurance company

(1) A third party's insurance company may not solicit a claimant who has a cause of action for personal injuries against its policy holder, to settle that cause of action where to the knowledge of the insurance company, the claimant is legally represented.

(2) A third party's insurance company may not make an offer to settle in circumstances not prohibited by subsection (1), unless-

(a) it has obtained adequate medical evidence of the personal injury and has disclosed it to the claimant; and

(b) the claimant is advised when the offer is made of his right to obtain legal advice; and

(c) the offer is in full and final settlement of the cause of action.

(3) Any settlement made in breach of subsections (1) and (2) shall be void. 

Look carefully at the words italicised above. I suggest that these be deleted; likewise, that paragraph (2) (c) is removed. The reasons for these amendments respectively are, on the one hand, that the claimant is even more vulnerable where he or she is not legally represented. Insurers often contact claimants before they have legal representation: it is well known in the insurance industry that the quicker you can contact a claimant following an accident, the more likely you are to be successful in capturing that client prior to them taking legal advice.

On the other hand, I propose the deletion of the full and final settlement clause to ensure that the existing legal position is not interfered with. Paradoxically, the Lords, by inserting clause (2) (c), create the inference that a settlement made is valid. I believe clients should be able to reopen a claim at the moment where an insurer has inappropriately settled the case direct.

Some who have reached agreements directly with insurers to settle claims feel cheated and desperate to do something about it after the event, but more often people are simply unaware.  As a practice, third party capture is plainly wrong, but those of us who wish to do something about it must be vigilant and ensure that the Lords' amendments, welcome as they are, cover all the bases.