Personal Injury: Fixed Costs Consequences

There’s a city in New Mexico called Truth or Consequences; as with the rest of life, a basic and essential component of any justice system is that there are consequences for not doing the right thing.

In the world of civil litigation, that solicitors like me inhabit, there is not only the consequence of having to pay out money whether in the form of damages or compensation if you break the law, but, in addition, another key component of the justice system is that the wrongdoer has to pay the successful party’s legal costs at the end.

Until a few years ago, the way costs operated in personal injury claims was that it rarely paid off to defend cases; in fact, forcing an indefensible case towards trial was a very bad idea from a financial perspective: things would get very expensive, and quickly.

The system therefore worked: cases that should not be defended were not, as it did not make sense to do so.  On the other hand, cases without merit were rarely pursued, because if the claimant gave up they would have to pay the defendant’s legal costs.

This was exactly what was needed for any sensible justice system: the strong cases settle and the weak cases do not go forward.

Then, around 2012, the Government, following a review by a senior judge, and pressure by wealthy insurance industry lobby groups, enacted a series of very bad ideas.  One of those ideas was the introduction of “fixed costs.”

“Fixed costs” as the name suggests set costs at a fixed level, being a level much lower than before.  What no one in the Government foresaw was what I like to refer to as “the law of unintended consequences”.  Suddenly it made little difference to wealthy insurance companies to force cases to trial as the amount they pay out is barely any different to that which they would pay out near the beginning.

As a result the courts are now clogged up and slower than ever, clients wait longer for their compensation, good cases that are complex become uneconomic to run (leaving genuine clients with no representation), and guess who pays for all the extra work the insurance company claims handlers have to do, the cost of their solicitors and barristers who push these cases to trial?  The answer – you do, with your increased premium.  Whilst the insurance industry has created a media myth linking increased premiums to car accident claims, or the increase in compensation to those with serious injury claims, the truth is that tremendous costs are wasted defending genuine injury claims.

However, the ability to make it harder for people to recover compensation is of course much to the insurance industry’s benefit – the harder it is, the less they have to pay out, and the longer they hold on to the money, the greater the interest and therefore profit on the premium.  Of course, they have little concern if the courts become clogged up with cases that should have settled months or even years earlier – what difference does it make to them?

Predictably, lessons have not been learned and now there is talk of extending fixed costs to higher value cases including medical negligence claims, serious injury claims and complex injury at work claims.  My prediction is that if that happens the problems I list above will pale into comparison with what will come.  The court system will grind to a halt, genuine clients with complex cases will be left without a solicitor, premiums will increase, cases will drag on and on.  Once again, the views of those in the profession fall onto deaf ears as the reforms stamp blindly on.

By James Winterbottom, Solicitor

Aston Knight Solicitors Bury are a specialist firm of solicitors that specialise in serious injuries including medical negligence claims and work injury compensation.  If you would like to discuss further please contact a member of our team on 0161 399 1231 or info@astonknightsolicitors.co.uk for a free and confidential discussion.