How to pay for a personal injury claim?
Access to Justice and the free, legal aid that they advocate can sometimes be a contentious subject; but it broadly encompasses the honourable cause that everyone is entitled to the protection of the law.
However, due to legislative changes, those who are injured are increasingly finding that barriers to justice are in place that take deductions from their damages and prevent legal aid from being used to fund a personal injury claim.
Despite this, there are still two additional mechanisms to help injured people - Legal Expenses Insurance (LEI) and Conditional Fee Agreement (CFA), sometimes known as a no-win-no-fee agreement. These are available to slightly redress the balance of power and enable genuine Claimants to bring claims. The way these work, and how they can apply to you are discussed below.
Legal Expenses Insurance (LEI)
LEI is sometimes included in household, car, holiday or travel insurance policies. Put simply, if you have an insurance policy that was in place at the time of your accident that provides funding for a legal claim in the event of an accident or injury, you may be able to use the policy to cover the costs of funding the claim. However, it is important to check the terms of the insurance as there may be restrictions as to what is covered.
Conditional Fee Agreements (CFA)
CFAs, more commonly known as ‘no win, no fee’ agreements, are used by solicitors to offset payment for work done until the conclusion of the case – either by settlement or trial. In this scenario the financial risk is borne by the solicitors. But what happens if you win or lose?
...CFA If you win
Then you will be responsible for paying your own solicitor’s costs, the disbursements that have been incurred on your behalf (including the premium for the insurance policy backing your CFA) and a success fee. The success fee takes account of the risk to your solicitors of you losing your case and is calculated based on a percentage of the total costs incurred by the solicitor for the management of your case. This percentage is often a high figure and 100% success fees are not uncommon. However, in Personal Injury (PI) cases there is a legal ‘cap’ on the size of the success fee following the passing of the Conditional Fee Agreements Order 2013. This ‘cap’ is 25% of the compensation that is awarded (in the event of a successful claim) for your pain and suffering, as well as past losses e.g. travel expenses and treatment.
Usually the defendant will pay the solicitor’s costs on your behalf. However, the defendant may (and often does) disagree with the costs incurred by the claimant and it falls to the court to decide the amount. If the court awards a lower amount for costs then this short fall is potentially recoverable from the claimant by the solicitor but this will depend on the approach of the firm.
...CFA If you lose
Then ordinarily your solicitor will write off their fees but you will be responsible for paying your own disbursements and the defendant’s fees and disbursements. Often these costs will be covered by the insurance policy your solicitor took out on your behalf so it will not cost you anything. This should however always be checked before you enter into any funding agreement.
For PI claims there is also a mechanism known as Qualified One-way Cost Shifting (QOCS) which prevents the defendants being able to claim their costs from you if you lose. This safety net will apply unless the claim is fundamentally dishonest.