The High Court has told a law firm it has no chance of winning back insurance costs from an intermediary it paid to make referrals.

Yorkshire firm PM Law Limited had an arrangement with insurance intermediary Motorplus to supply details of potential litigants for more than four years.

The arrangement worked through PM Law contacting referred people to confirm whether or not they had before-the-event (BTE) insurance. If they did not, PM Law would enter into a conditional fee agreement and issue an after-the-event (ATE) insurance policy. Referral payments for accepted cases would be invoiced on a monthly basis.

The scheme lasted until January 2011, when Motorplus told PM Law that no further referrals would be made. However, the law firm alleged that the intermediary had committed to making a minimum number of acceptable referrals, and is claiming for lost profits.

In PM Law Ltd v Motorplus Ltd & Ors, the High Court was asked to consider a separate claim for £3m by PM Law, to recover sums from Motorplus and its insurance partners that the law firm said were due and payable under BTE and ATE policies.

PM Law said it held the right to recover disbursements and legal costs from the defendants under the contracts of appointment.

Motorplus sought summary judgment on the basis that the claim had no real prospect of success. The intermediary argued it was not liable to pay any sums due under BTE and ATE policies, saying there was no ‘compelling reason’ to let the claim go to trial.

Lawyers for PM Law argued that the expectation was that solicitors were reimbursed directly, with no money passing through the hands of the client. It was therefore the intermediary who would pay the solicitor and to whom the solicitor would look for payment.

But The Honourable Mr Justice Picken described this claim as ‘misconceived’ and said none of the documents put forward supported PM Law’s case.

‘On the contrary, they bear out that it is PM Law’s client (not PM Law) who is entitled to be indemnified in respect of costs,’ said the judge.

Picken identified a ‘distinct vagueness’ about how the contracts of appointment came to be made and what they comprised.  He stressed that PM Law’s submission that it held a ‘title to sue’ was an ‘unwinnable’ and ‘hopeless’ case.

‘The fact that an insurance agent administers policies and commonly pays claims does not make it personally and directly liable to make payments under policies.’

The judge also noted that PM Law claims damages representing lost profits as a result of the referrals being below levels the law firm claims were agreed. That claim, amounting to £4.4m, was not the subject of the present application.