The flagbearer for the new breed of law firms has been fined £143,558 after it was alleged to have overcharged insurers for medical report costs.

Co-op Legal Services was sanctioned by the Solicitors Regulation Authority after an investigation into potential breaches of the indemnity principle.

The firm had negotiated an agreement with a medical agency to pay report fees which incorporated a discount. But the firm then invoiced third party insurers the full amount as disbursements. In a decision notice published on Thursday, the SRA said CLS wrongly recovered the sum of £28,777.12.

The regulator added that CLS 'acted recklessly in not considering the impact of its agreement with a medical disbursement supplier regarding the recovering of its fees upon its processes and procedures used by its staff'. 

The resulting penalty is one of the largest ever issued by the SRA, which has the power to issue much bigger fines against an alternative business structure than a traditional firm. Co-op Legal Services was one of the first three ABSs to be licensed by the SRA, back in 2012.

In a statement, the firm said: ‘Co-op Legal Services takes its values of openness, honesty and social responsibility seriously. We accept the SRA’s findings and have been committed to resolving this error, which led to overpayment of medical fees by third party insurers.

‘Our actions to rectify this inadvertent accounting error included further staff training and amendment of our internal systems. We acted quickly once the error was fully identified to ensure that third party insurers were reimbursed. No clients were negatively affected by this error.’

The statement noted that the firm has a strong track record of compliance with the SRA with no previous disciplinary history, adding: ‘We have investigated this matter fully and made all necessary changes to accounting processes to ensure this error cannot reoccur.’

No individuals associated with Co-op Legal Services have been prosecuted over the matter. The SRA’s ruling is not an agreed outcome but the firm says it has worked closely and openly with the SRA throughout, and accepts its findings.

The indemnity principle is well established in personal injury work, meaning that a party is entitled to recover only the costs they have incurred. Any additional recovery would be a penalty on the losing party and would not be permissible.

Since launching as an ABS, Co-op Legal Services has had a turbulent few years characterised first by financial losses and latterly a growth in profits (checked by this year’s lockdown). It has made a number of cuts to its personal injury business since 2013 but continues to practise in this area in both serious and lower-value injury work.

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