Thought leader

Many personal-injury lawyers may be forced out of business unless they improve risk management when taking on conditional-fee arrangements (CFAs). Several well known names in the personal-injury industry, such as Merricks, have already folded, while others, including Wragge & Co based in Birmingham and Aberdeen’s Burnside Kemp Fraser have discontinued work in this area. At present, the overwhelming feeling is that personal injury is a ‘no win’ as far as profitability is concerned.

The current battle between APIL and the insurance industry over the myth of compensation culture is being laid firmly at the feet of the insurance industry. But APIL must also look to its own members since it is the actions of some of them, by not risk assessing claims properly, that has allowed this debate to rage. Headlines such as ‘Life wrecked by tin of Fray Bentos that hit my head’ (Daily Express, 18 May 2004) are great stories for the media, but also show that some lawyers are putting pounds before performance. This results in distrust from the insurance industry and the resulting high premiums, as well as ridicule in the media.

In Invaro’s experience, the request for additional information during its checking procedure is usually for claims forwarded by lawyers. This is because they have usually conducted their own quality checks to decide to run with the case and sometimes leave out information that is crucial to substantiate the claim when applying for funding.

Despite the media claiming there exists a compensation culture in the UK, the demise of legal aid means no-win, no-fee agreements are now normal practice for all personal-injury claims.

For all practitioners operating in CFA work there is an element of risk. A successful personal-injury risk practice must have sufficient controls in place to assess the risk of each claimant on a case-by-case basis. These prevent a firm taking on a case that is either not viable or for which the firm lacks adequate knowledge and expertise.

Unfortunately, some lawyers are not sufficiently experienced in identifying and managing risk. A lot of this is down to attitude and there is definitely a sense of complacency among a few law firms involved in personal injury.

Initial assessments need to be followed by a continuous review of risks inherent in a case, as these might only appear further down the line. Constant monitoring means that a case can be identified as not viable at any stage of its progress.

This means that clients are kept up to date on progress and alerted in advance to any problems that may exist. Solicitors consequently find it far easier to make the hard decisions and have those difficult conversations with clients, instead of feeling they have to stick with their original judgement.

As a joint funder and insurer of a claim, it is imperative for operators such as ourselves that only solid, credible claims are pursued, since if a claim fails, it means that our insurance policy pays out. Maintaining a high success rate is vital to maintain balance-sheet strength.

First, simple vetting of the claim validates the actual identity of the person and basic case details. Simple checks at this stage can show repeat offenders, false names and addresses on the claim form, whether the statement of truth has been signed and other simple flaws, which mean the claim will not be processed.

Once a claim has passed this basic check, a more thorough investigation is required by a team led by a qualified legal professional. The team looks at each case in more detail and reviews several additional areas to ensure its validity. This includes looking at the claimant’s previous claims history and any inconsistencies in the evidence, such as making sure the injuries are consistent with the accident.

Only when these checks are satisfied should a case be accepted for insurance and funding.

Once the decision to fund a case has been taken, this should not be the end of the auditing process. Each case should be constantly monitored so that the integrity of the funder’s underlying asset (the case) can be ensured.

It cannot be denied that CFAs also have their limitations. For while covering firms against losing a case, they do not cover you if you have to pull out of a case, nor for the time spent investigating a case that ultimately proves to be not worth pursuing.

But having control systems in place ensures the validity of every claim being processed. Through continuous risk assessment and auditing of cases, it is possible to minimise the risk involved in all personal-injury cases and give peace of mind to both solicitor and claimant.

Steve Leigh is marketing director at Invaro. He can be contacted at steve.leigh@invaro.org.uk.