Law firms may be exposed to professional negligence claims
The Jackson reforms could leave law firms exposed to professional negligence claims, a legal expenses insurer has warned.
The new rules, due to take effect on 1 April, prohibit the recovery of after-the-event (ATE) premiums for policies purchased on or after that date, regardless of when the client entered into a retainer with their solicitor.
This could land clients with huge bills they can’t pay and leave solicitors facing negligence actions if the solicitor fails to secure ATE before the 1 April deadline.
According to Russell Smart, chief operating officer of Elite Insurance, there are thousands of conditional fee agreement (CFA) cases where ATE insurance has not yet been purchased either because the case is not insurable until investigations are complete or enquiries are still ongoing. This means that, where CFAs are entered into before 1 April, the client may neither be able to recover their ATE premium nor benefit from the 10% increase in damages and qualified one-way costs shifting.
Consequently, clients will either have to pursue their cases uninsured or face disproportionately high ATE premiums which will have to be paid back from their damages.
Smart said: “ATE insurers tried to engage with Lord Justice Jackson and the Ministry of Justice over the last three years but without success and therefore it does not come as a surprise that they have not thought through the ramifications.
“The rules should be amended to allow for recoverable ATE premiums based on the date the CFA was entered into.”
