Claims management companies will be prevented from offering cash incentives to bring damages claims if a Ministry of Justice proposal to tighten up the rules comes into effect. This stems from the October 2010 report “Common Sense – Common Safety” by Lord Young of Graffham which maintained that the growth of claims managements companies “has had a dramatic impact on the way we perceive the nature of compensation”.
The move to curb up-front incentives is fuelled by media stories about individuals receiving large compensation payouts for personal injury claims and by constant adverts in the media offering non-refundable cash inducements and the promise of a handsome settlement if they claim. Basically, the legislation would prevent claims management companies offering an immediate cash payment or a similar benefit as an inducement for making a claim.
Tactics such as “we’ll pay you £200 immediately after our solicitors approve your claim,” or “If the solicitor believes they can win the case and accepts it, we will award you £300 as an up-front payment “ and giving shopping vouchers or automatic entry into a prize draw will no longer be legal. This does not prevent claims management companies from offering to pay something at a later stage, or the classic no-win, no-fee proposition.
The proposals are still out for consultation until 10th February. The Ministry of Justice plans to implement the amended rules in April 2011 and subsequent changes to regulations on advertising and conduct of claims may result from further review of the conduct rules. The proposals also include radical changes to conditional fee arrangements so that a successful claimant would not be able to recover his lawyer’s success fee or the ATE (After The Event) insurance premium from the defendant.
ATE Insurance is taken out once legal proceedings are contemplated and indemnifies the insured’s own disbursements and his opponent’s costs and disbursements in the event that the legal action is ultimately discontinued or lost at trial. It’s cover that effectively means you have nothing to lose, so by denying claimants the opportunity to recover the costs of success fees and ATE insurance, it’s hoped that in future, claimants will have a financial stake in keeping any legal costs down.
Here at Compensationclaims.net we welcome all these proposals. One effect should be to tighten up the rules of conduct across the industry and improve the standards of advertising in the sector, with more realistic and less overblown promises or commitments being made in order to encourage litigation.
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