Changes to funding for personal injury cases

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The government’s much criticised civil justice reforms came into force on 1 April 2013. These reforms have affected injured claimants’ rights to recover elements of their legal costs in both personal injury and clinical negligence cases.

The following changes were made:

1. Recoverability of success fees
Solicitors are entitled to charge a success fee (a percentage uplift on their fees) in conditional fee (“no win no fee”) agreement cases to balance out the potential risk of losing a case and not being paid at all. Prior to 1 April 2013 these success fees were paid by the other side in addition to damages and legal costs. However, under the new reforms, success fees will no longer be recoverable from the other side, instead they will be paid by claimants themselves.

2. Damages based agreements
Damages based agreements are now permitted as an alternative means of funding cases. Fees in successful cases will be calculated at an agreed percentage (capped at 25%) of the damages recovered by the claimant, although this is offset against any costs that are recovered directly from the opponent.

3. “One way costs shifting” and recoverability of after the event insurance premiums
The default position is that the winning party in any case pays the loser’s costs. However, “qualified one way costs shifting” has now been introduced which will mean that the claimant will not be responsible for the defendant’s costs in unsuccessful cases (although this will not apply if the claimant fails to beat an offer made by the defendant).

After the event insurance is often taken out to cover any liability to pay the other side’s costs (and to pay the claimant’s own disbursements) in case the claim is lost. However, the premium for such insurance is no longer recoverable from the other side, except potentially only in respect of medico-legal reports in some clinical negligence claims.

The above changes are significantly less advantageous to injured claimants than under the previous system.