By Jonathan Rayner


A group of nine Lloyd's syndicates embroiled in The Accident Group (TAG) litigation has opted not to issue negligence proceedings against 638 panel law firms - but is to continue pursuing them for the referral fees paid to a TAG sister company, it has emerged.



The action to recover what were called investigation fees relates to the £310 per case that law firms were obliged to pay to TAG's sister company, Accident Investigations Limited (AIL), and claimed back from insurers. In 2004, the Court of Appeal upheld the decision of the Senior Costs Judge, Peter Hurst, that these were really referral fees, which were not allowed at the time under Law Society rules.



Ian Herbert, the partner at Hugh James in Cardiff representing the syndicates, said he was 'not at liberty to disclose why the decision had been made not to issue negligence proceedings'.



However, he added that there were more than 100,000 investigation fee claims outstanding and that many law firms would still be dangerously exposed.



Mr Herbert said: 'A three-day case management conference at the end of February should make things clearer.'



Steven Reynolds, a partner at City firm Reynolds Coleman Bradley representing around 40 panel firms, insisted that none of the insurer claimants in 'the TAG money-go-round' had a convincing case for reimbursement.



He said: 'Each of the claims involves a failure on the part of one of the insurer claimants to ensure that their underwriting agent [TAG] repaid sums advanced by lenders...They are simply the authors of their own underwriting bad bargains.'



Mr Herbert said he is confident that this argument 'will be proved a fallacy' in court.



Last week the Gazette revealed that insurer Winterthur intends to press ahead with a separate negligence action against panel firms, (see [2007] Gazette, 8 February, 1).