David Bott, whose law firm has led the way in handling huge numbers of low-value flight delay compensation claims, said last week the government’s planned tariff scheme for personal injury cases would force him out of the market even if he adopted the same approach for them.
Meanwhile, the managing partner of leading alternative business structure Minster Law said technology would be “the saviour of the small claims industry”, but it would mean that all the staff working in a law firm would have to be technologically competent.
With the government planning both to raise the small claims limit to £5,000 and reduce the compensation available for whiplash cases so that most claims would be caught by it, the question is whether solicitors can make cases in the small claims court work.
Mr Bott, senior partner of Cheshire firm Bott & Co, told the PI Futures conference in Liverpool that the figures were so low that law firms would have to get in cases for “near zero” and process them four times more efficiently to make the new system work.
“I think we could do the efficiency, but I think it would be a struggle and far more difficult to get the work in,” he said.
He said insurers could revert to what they did in the 1980s, when they paid firms to take on their policyholders’ claims because they were “an inconvenience for them” and law firms had nothing to spend on marketing.
Mr Bott said firms would have to re-engineer their personal injury departments to cope with the changes set out in the Civil Liability Bill, rather than “tweak them” as many had following LASPO.
Firms would have to adopt a similar technology-driven model to his flight delay practice, which consisted of three marketing people, six software developers and only six fee-earners.
Mr Bott said it would be essential to process a high volume of cases at low cost. Law firms would have to push cases up the tariff as much as possible and improve their working capital by cutting the time needed to process claims.
He suggested firms consider unbundling, and advising clients just on liability or quantum.
The former president of the Association of Personal Injury Lawyers said firms had three options – making a success of the proposed changes, exiting the market or making “no or insufficient” changes.
“Whatever decision you make, you will be involved in two years of intensive management.”
Mr Bott said that, based on current figures and although his firm was “very efficient”, he would be forced to adopt the second option and exit the market.
“I would hope, as we get nearer to it, the numbers are different, but whatever you do, don’t go on as you are.”
On timing, he said the start date for implementation of the reforms would not be before April 2019, but his firm believed it would be more likely to happen in October that year.
Michael Warren, managing partner of Minster Law, agreed that automation was the answer, and said technology rather than the government would be the “real driver” of change.
“Technology will be the saviour of the small claims industry, not the assassin. People want to engage with technology, as they do in every other aspect of their lives.”
Mr Warren said the staff of law firms would have to become technologically competent throughout the business and anyone who thought the “manual approach” to small claims work could continue was living in “dreamland”.
Simon Gibson, managing partner of Liverpool firm SGI Legal, said every personal injury firm needed case criteria which were applied consistently at the front end of the business.
“You can’t afford to accept bad cases, or not to accept good ones. You can accept better quality cases.”
Mr Gibson said the IT department was the most important one in a law firm for determining profitability, because a cut of two months in case lengths could result in a “dramatic” improvement.
“If ever there was a time for innovation, it is now. Don’t be afraid to take well-planned risks.”
Jeff Zindani, managing director of Acquira Legal, which specialises in the sale and purchase of personal injury caseloads, said activity had been increasing in the last two years and would increase further if the government’s reforms went ahead.
He said although small firms were currently better placed than some medium-sized firms in terms of liabilities, if the reforms went through, he could not see “much viability” for them.