CMCs will start running – and under-settling – cases to survive, lawyers warn

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By Legal Futures

16 November 2011


Bott: bill opens door for CMCs to start handling cases themselves

Changes to the personal injury landscape mean that claims management companies (CMCs) and others may step out of regulation altogether to run cases which commercial pressures may lead them to under-settle, the Association of Personal Injury Lawyers (APIL) has warned.

Responding to a Legal Services Board’s consultation on regulation, APIL said pre-issue personal injury work needs to become a reserved legal activity to negate the “huge risks” of commercial enterprises taking advantage of injured people.

The association said the combined effect of the Jackson reforms, referral fee ban and introduction of both contingency fees and alternative business structures is to make it probable for businesses that currently do not conduct personal injury claims to do so in the future.

“Unless [CMCs] become a regulated ABS, they could conduct personal injury claims without any regulation whatsoever, and their clients will therefore be unprotected. There will be commercial pressures on them to under settle cases as they will be unable to issue court proceedings, as this is a reserved legal activity.

“Indeed, if a business, which may have been a CMC, no longer refers cases, it may not even need to be regulated as a CMC. We further understand that the Claims Management Regulator has decided not to insist on compulsory professional indemnity insurance for CMCs following their recent review of claims management regulation.”

APIL told the board that any business may set up and offer to resolve claims on a contingency fee basis. “On the face of it, this may to the uninformed consumer be no different to what is being offered by a firm of solicitors or a fully regulated ABS. However, the level of consumer protection will be vastly different if the pre-issue conduct of personal claims remains an unreserved activity.”

APIL president David Bott said: “CMCs are very good at advertising legal services, but they’re not lawyers. These businesses won’t be making any money from referral fees after they are banned, so will need to do something else to survive. Changes in the current Legal Aid, Sentencing and Punishment of Offenders Bill will open the door for them to start handling cases themselves.

“A CMC would need to settle a case to recover the costs and stay in business. The case would have to be taken over by a solicitor when it gets as far as court, so they will want to settle before it gets that far. This could mean cases are under-settled and injured people don’t receive all the damages they need for their future care.”

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