Steve Holland casts doubt on whether the latest ruling on The Accident Group will establish which firms failed to vet and monitor cases properly

The ongoing saga of The Accident Group (TAG) looks likely to run and run. Around 700 firms are still facing claims from insurer Winterthur that they failed in their duty of care by accepting un-winnable personal injury cases from TAG - landing the insurer with bills for millions of pounds from after-the-event (ATE) insurance policies.


The latest development is a legal privilege ruling by Mr Justice Aikens that gives Winterthur the right to review a sample of solicitors' files to establish whether firms had taken on cases which they had a reasonable expectation of winning (see [2006] Gazette, 21 April, 1). Without access to these files, the claimants' chances of proving that firms had acted negligently would have been severely diminished.


The judge ruled that the claimants had waived their litigation privilege under the terms of the after-the-event (ATE) insurance contract and that no legal professional privilege attached to documents pre-dating the contracts as litigation had not been contemplated at that time.


The defendants have decided not to pursue an appeal, no doubt based on the fact that they think they have strong defences to the main action.


So where does that leave the firms caught up in the TAG litigation? The ruling allows Winterthur to inspect a sample of files and the recent case management conference has set the sample at 10% of cases, with a minimum of ten cases and a maximum of 50 cases per firm. This could become a further point of controversy. There are some 76,000 individual cases involved in TAG - and the sample of 10% has to be completed by September/October - but would it prove conclusively that all firms failed to vet and monitor cases properly?


If Winterthur can show conclusively that lawyers took on cases that had a less than 51% chance of success - itself a low threshold from an underwriting perspective - it will be able to claim that firms had failed in their duty of care. This could lead to all the cases being found against the firms involved - hitting practices and professional indemnity insurers with a bill for £100 million-plus.


But it will not be as simple as that. From our experience of reviewing TAG cases that have already been notified as potential professional indemnity claims, it is clear that different firms adopted different standards in vetting cases brought to them from TAG. Some, it appears, undertook little extra due diligence - while others adopted an extremely high standard of vetting. If a blanket ruling is made based on random sampling, how will firms that exercised extreme prudence react if they are found liable? How the parties react to the court's decision on sampling will be interesting.


We are a long way from any conclusion on TAG - and even when this round of litigation finishes, there remains the spectre of new litigation brought by ATE insurers involved in other failed claims management firms, such as Claims Direct.


With more than 350 claim management companies active in the UK, the litigation highlights the importance of a thorough assessment of cases taken on through those companies before a conditional fee arrangement and ATE insurance are put in place. With TAG litigation receiving such media attention, failure to undertake a proper assessment of the chances of the cases succeeding would be reckless in the extreme and would undoubtedly result in an immediate claim.


One outcome of TAG could be a set of guidelines on the assessment and management of these claims, but that will be many years away and no doubt there is many a slip and trip ahead before then.


Steve Holland is the executive director of Alexander Forbes Professions