Everyone's a TAG winner

CLAIMS: scheme breached referral code but not indemnity principle, court rules

Defendant firms in The Accident Group (TAG) test cases are claiming victory this week after the senior costs judge ruled that panel firms breached the introduction and referral code by paying investigation fees under the scheme, and slashed the recoverable premiums by half.

However, the claimant firm involved is triumphantly predicting a massive bill for the insurance industry after the judge dismissed arguments that the scheme breached the indemnity principle.

Ruling in the second tranche of the TAG cases, Chief Master Peter Hurst said that payments made by firms to subsidiary Accident Investigations - a flat rate of 310 - was a referral fee and irrecoverable, and also dismissed arguments that they could be treated as disbursements.

The premiums were originally 840 and later 997.50, but Master Hurst said they should be slashed to 450 for the year 2000, to 480 for 2001 Lloyds-underwritten premiums and to 425 for 2001 NIG-underwritten premiums.

But he added in the claimants' favour that the Lloyds premium might rise if a swing premium was later allowed.

The ruling, which echoed his decision in the Claims Direct test cases, will affect some 250,000 claims.

Master Hurst granted TAG leave to appeal the premium and Accident Investigations payment issues; he also granted the defendants leave to cross-appeal the premium decision.

Manchester firm Rowe Cohen acted for TAG.

Partner Anthony Dennison said the ruling was an endorsement because it only referred to policies taken out in 2000/2001, before the scheme was re-worded.

He said the main issue was the judge's decision that there was no breach of the indemnity principle.

'There is 4-5 billion in the insurance industry coffers that rightly belongs to clients and their solicitors,' he added.

'Now they will receive what is rightfully theirs.'

However, Vizards Wyeth partner Jason Rowley, who acted for one of the defendants, accused Mr Dennison of plucking figures out of thin air and warned that post-2001 policies would come under scrutiny when more test cases are brought.

'Unless the Appeal Court overturns Master Hurst's judgment, TAG are going to be in serious difficulty in continuing in business without radical alterations to their business model,' he insisted.

Leading costs expert Professor John Peysner of Nottingham Law School said such litigation would not go away until greater transparency was introduced.

'We need to make referral fees lawful so that everyone can compete on a level playing field,' he argued.

Paula Rohan