Insurer Must Compensate Solicitor After 'Settling Direct' With Its Clients

Originally published by Out-Law.com

An insurer which offered to settle directly with personal injury claimants who had filed notices of their claims on the Road Traffic Accidents Portal (RTA Portal) must compensate the claimants' solicitors, who would otherwise have been entitled to costs by virtue of a conditional fee agreement (CFA).

The UK Supreme Court, in a unanimous judgment, upheld the existence of what is known as the 'solicitors' equitable lien', which law firm Gavin Edmondson Solicitors was entitled to enforce against the insurer, Haven Insurance. It did, however, disagree with the way in which the Court of Appeal had attempted to "re-formulate" the lien to create a general principle protecting solicitors from any adverse interference with their expectation that they would be able to recover their costs.

"Once a defendant or his insurer is notified that a claimant in a road traffic accident case has retained solicitors under a conditional fee agreement, and that the solicitors are proceeding under the road traffic accident protocol, they have the requisite notice and knowledge to make a subsequent payment of settlement monies direct to the claimant unconscionable, as an interference with the solicitor's interest in the fruits of the litigation," said Lord Briggs, giving the judgment of the court.

"The very essence of a conditional fee agreement is that the solicitor and client have agreed that the solicitor will be entitled to charges if the case is won. Recovery of those charges from the fruits of the litigation is a central feature of the road traffic accident protocol," he said.

The dispute arose over personal injury claims by six individuals who had been involved in road traffic accidents involving vehicles whose drivers were insured by Haven. Each individual entered into a CFA with Edmondson, designed to ensure that they would not have to pay the firm's costs directly from their own pockets. Edmondson notified the insurer of the claims via the RTA Portal, which was set up in 2010 to allow parties to manage low value personal injury claims online. Use of the RTA Portal is governed by the English civil courts' Pre-action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents.

Shortly after the claims were logged on the RTA Portal, Haven approached each of the claimants directly with a settlement offer, on terms which did not include any amount for solicitors' costs. The individuals all accepted these offers...