Cost Wars in England and Wales: The Insurers Strike Back

Abstract

The last fifteen years have been a remarkable period in the reform of civil litigation costs in England and Wales. This short essay traces some of that history to give international readers a sense of why and how our system has developed in the way it has and where it is currently headed. It is a story which begins with problems with, and then the abandonment of, a legal aid system for personal injury cases. It takes in the acceptance of contingency fees albeit via a hybrid of hourly rates and contingency fees (known as the conditional fee agreement; CFAs) and subsequent attempts to square that acceptance with the twin principles of full compensation and the loser pays costs rule. This led to a peculiarly expensive costs and insurance system which sought to maintain the loser pays costs rule whilst sidestepping its reality. At the same time, the solicitors’ profession relaxed rules on referral fees which have enabled non-lawyers, or claims managers, to flourish. Sustained attack from the insurance industry in relation to personal injury claims and the media (partly because of the particular costs and dynamics of libel litigation), has been met with a review by a Court of Appeal judge. Lord Justice Jackson’s resulting Report, largely endorsed by the Government, is set to return the broad position to that which pertained in the mid-90s albeit with quite a few new, and potentially significant, wrinkles. In the meantime, though, the legal services market has moved on.