Legal profession divided as government supports recoverability of CFA premiums

PERSONAL INJURY: 'Recoverability even when proceedings have not been issued', says Lock

A clear government statement that successful personal injury (PI) claimants should recover their insurance premiums - even when proceedings have not been issued - received sharply differing responses from practitioners this week.

Lord Chancellor's Department minister David Lock made thestatement in Parliament before Christmas in response to a question from PI solicitor and Labour MP Andrew Dismore.Mr Lock said: 'The government's policy is that the premium paid for cover against the risk of having to pay legal costs should be recoverable from the losing opponent...

the government believes that recoverability includes premiums on policies taken out before proceedings are issued in any particular case.' Law Society President Michael Napier said: 'It is pleasing that the minister has made the government's intentions on conditional fees clear.

This is consistent with the view that we have held throughout.

Now there is no longer any confusion, I hope the courts will take decisions in line with the rules and practice directions that are designed to implement government policy.' Martin Staples, a partner at London firm Vizards Staples & Bannister and immediate past president of the Forum of Insurance Lawyers (FOIL), said the rules for conditional fee agreements (CFAs) did not sanction recoverability for premiums taken out before proceedings are issued.

He said Mr Lock's statement did not constitute any change in the law, adding: 'The government will leave the issue up to the courts.'If the law were changed to fit Mr Lock's statement, he said this would have a disastrous effect on insurance premiums, pushing them up as they coped with the demand on insurers to pay premiums for cases that settle.

The issue was best left for negotiation between practitioners in the field, he said.

But Frances McCarthy, president of the Association of Personal Injury Lawyers (APIL), said the statement was 'very helpful, clear and unambiguous', and that it could be put before judges in court as authority for an interpretation of the law allowing recoverability.

If pre-action premiums were not recoverable, she said, insurers would not be offering a good spread of risk, and the cost of premiums would rise sharply to reflect this.

However, Ms McCarthy welcomed dialogue with FOIL to decide what level such pre-action premiums should be pegged at, if FOIL will first concede that the premiums are now recoverable.

Jeremy Fleming