Peers bid to introduce statutory control of third-party "capture" and tighten up referral fee ban

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By Legal Futures

25 November 2011


House of Lords: battle over bill gets into full swing

Peers have launched a bid to curb third-party capture of potential claimants by insurance companies, and also spell out the proposed referral fee ban in greater detail.

The first tranche of amendments to the Legal Aid, Sentencing and Punishment of Offenders Bill, submitted by a quartet of Liberal Democrat peers, would prevent an insurance company from soliciting a personal injury claimant to settle where they know the claimant is legally represented.

Where this is not the case, insurers would not be allowed to make an offer to settle unless they have obtained adequate medical evidence of the injury and disclosed it to the claimant, and the claimant is advised when the offer is made of his right to obtain legal advice.

The move will please claimant lawyers who have campaigned against third-party capture – which insurers call third-party assistance – but may not be seen as going far enough because the practice would not be banned altogether.

Last year the Association of British Insurers issued a voluntary code of conduct for third-party assistance, which includes highlighting at every stage the victim’s right to seek independent legal advice.

On referral fees, the peers – Lord Thomas of Gresford, Lord Clement-Jones, Lord Carlile of Berriew, and Lord Phillips of Sudbury – have laid an amendment that would explicitly put a regulated person in breach of the ban if he “arranges for another person to provide, or is paid for the provision of, marketing services by unsolicited SMS text message, unsolicited telephone calls or any marketing in a hospital or other primary treatment centre”.

A further amendment seeks to include in the list of arrangements that would not be treated as a referral fee any payments made “for the purposes of providing a pooled marketing service”.

As first reported by Legal Futures, Lord Thomas is also leading a bid to introduce statutory regulation of third-party litigation funding, the amendment being laid on the day a voluntary code of conduct for funders was published.

Meanwhile, the Ministry of Justice has refuted a report in yesterday's Mirror that a decision has been taken to reverse the decision to take clinical negligence out of scope of legal aid – a widely expected concession as the bill progresses through the House of Lords.

Nonetheless, leading claimant lawyer David Marshall, managing partner of London firm Anthony Gold, has suggested that whether or not clinical negligence remains in scope will actually make little difference to the public purse. This is because of the planned introduction of a supplementary legal aid scheme (SLAS), which will take 25% of any damages (excluding future loss) from cases won under legal aid.

, he said the SLAS meant that in many cases clients will be worse off funded by legal aid than conditional fee agreements. “This might explain why the government now appears relatively relaxed about legal aid for clinical negligence,” he said.

“The effect of the SLAS is likely to mean that there would be no cost to the public purse, the expense being met by the victims of medical accidents instead. Indeed it is entirely possible that the SLAS will even make a profit whereby victims of medical accidents subsidise the state out of their compensation for the expense of providing legal aid to others.”

Finally, the Ministry of Justice is still unable to say when its response to its Solving disputes in the county court consultation will be published. The consultation closed on 30 June, although we understand that a report has now been prepared.

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One Response to “Peers bid to introduce statutory control of third-party "capture" and tighten up referral fee ban”

  1. Whilst ‘marketing’ in hospitals might be considered inappropriate at first thought, provided it is ‘reasonable’ in the context of the message (currently all advertising material has, in any event, to be approved by the relevant Health Authority) then the reality is that it is no different to any other form of marketing with one important exception in these austere times, the income or services derived by the Health Authorities from permitting such marketing materials.

    Perhaps there Lordships might like to consider how they might replace the value of the contracts measured no doubt in the millions of pounds!!

  2. Chris on November 29th, 2011 at 12:45 pm

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