It can often be confusing for a client following an accident as to their rights to bring a claim for personal injury and in particular the costs associated with bringing a claim. In this blog our aim is to address the most common methods of funding a personal injury claim.
Conditional Fee Agreement (‘CFA’)
This is the most common method of bringing a personal injury claim. The majority of personal injury claim are funded by a Conditional Fee Agreement (CFA) which is also referred to as a ‘No Win No Fee’ Agreement.
Conditional Fee Agreements were introduced in 1998 to help provide legal representation to people who were unable to afford legal representation.
A Conditional Fee Agreement is a funding arrangement whereby you enter into a written agreement with your Solicitors which sets out what you need to pay your Solicitors in the event you are successful in bringing a claim.
This is a method of funding which can be advantageous as it does not require a client to pay any fees upfront for their claim. Furthermore, if you are unsuccessful in bringing a claim then you will not be liable for your solicitor’s legal fees. Where a client is successful in bringing a claim, they will be entitled to damages and costs from their opponent.
Before a Conditional Fee Agreement is offered, solicitors will usually consider the facts of a case and carry out a risk assessment to ensure the prospects of success are more than 51%.
Until April 2013 solicitors were able to charge a ‘success fee’ from their opponent where a case was successful. Since the introduction of the Legal Aid, Sentencing and Punishment of Offenders Act (LASPO) 2012 which became Law in April 2013, Solicitors can no longer recover the success fee from their opponent but charge a client a maximum deduction 25% from their compensation. The success fee is to reflect the risk taken by a solicitor in the event a claim is not successful.
Solicitors are not able to charge a success fee on future damages such as future loss of earnings or future treatment and is only limited to past damages and losses. The success fee will be deducted from the damages at the end of the claim. This way a client is not required to make any payment at the beginning of this claim.
There are a few exceptions to the rule that a client will not be responsible for their own solicitor’s costs. A solicitor may terminate the Conditional Fee Agreement where a client fails to co-operate or gives misleading instructions. In these circumstances the client would be responsible for their own solicitor’s costs.
After The Event Insurance (ATE)
In conjunction with a Conditional Fee Agreement your solicitor will recommend for an After the Event Insurance policy to be taken out. This type of insurance policy will step in to protect a client against their opponent’s costs and their own solicitor’s disbursements in the event they lose their claim. Without such a policy in place, a client might find themselves in a difficult financial situation.
If a claim is successful the cost of the ATE insurance will have to be paid by the client at the end of the claim from their damages. Since LASPO came into effect in 2013 the cost of ATE Insurance premiums are no longer recovered from the opponent. In the event a claim is not successful a client will not need to pay for the cost of the ATE premium as the policy is usually self-insured.
The cost of the policy will depend on the type and level of cover and may well increase once Court proceedings are issued.
Trade Union Funding
There may be occasions where a client belongs to a trade union which provides funding to bring a claim for a personal injury claim. The trade union may enter into an agreement with the solicitors to provide legal advice on a no-win no-fee basis.
Solicitors should be informed of the trade union membership and provided with a copy of the membership policy at the outset of the claim, so enquiries can be made with the relevant trade union to establish if cover can be provided.
Legal Expenses Insurance (LEI)
This type of funding is also known as Before the Event Insurance. It is likely that you may already have this type of insurance policy with motor, home or travel insurance.
Where an existing Legal Expenses policy is in place, it is not necessary to enter into a Conditional Fee Agreement. Before entering into a Conditional Fee Agreement, existing insurance policies should be checked to see if there is existing cover and if so, a copy of the insurance policy should be provided to the solicitors at the outset of the claim so that enquiries can be made to seek confirmation from the existing insurer that cover will be provided.
In some case a client’s existing motor or home insurer may have specific conditions such as choosing a Solicitor from their own panel which can limit the client’s choice of representation.
With this method of funding, a client is required to pay their solicitors legal fees upfront irrespective of whether the case is won or lost. The fees will be calculated in accordance with the solicitors’ hourly rate and the time spent on the case. Alternatively, some solicitors may choose to offer fixed fees which again will need to be paid upfront.
This is not a common funding method in personal injury claims and in most cases, a Conditional Fee Agreement will be offered.