Your item 'Insurance Plea' (see [2008] Gazette, 24 April, 4) reports that at least one personal injury defendant lawyer is suggesting that contingency fees should be allowed in order to 'reduce costs'.
At first glance such an arrangement may appear attractive to liability insurers, who may assume that contingency fees would move the costs burden from the defendant to the claimant. This would indeed 'reduce costs' for insurers. However, in most jurisdictions with an English-based legal system that permit contingency fees, the costs burden continues to lie with the defendant since, quite naturally, courts see fit to increase the level of damages awarded to take into account the fact that the innocent party will suffer a deduction from damages in the order of 30-50%.
It seems to me that the Association of British Insurers (ABI) conveniently overlooks the fact that damages awarded in England are often lower than in other comparable jurisdictions. As such, comparison of legal costs as a percentage of damages - '40p costs for every £1 in damages' - is invalid.
In its deliberations on costs, the Ministry of Justice would do well to note that not all ABI members support the association's campaign to reduce insurers' costs by reducing legal fees or restricting recovery of reasonable ATE premiums. Being specialist insurers, we avoid the inherent conflict of interest that inevitably arises when a liability insurer also writes legal expenses insurance.
Paul Asplin, chief executive officer, DAS UK Group, Bristol
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