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Referral fee ban extends to claims managers and insurers

August 16, 2013

In June of this year, the SRA investigated (and found) that many personal injury lawyers had fallen on the ‘wrong side’ of the referral fee ban imposed in the wake of the Jackson Review.

The essence of the ban was that referral fees for personal injury cases to PI lawyers were to be made regulatory offences under the governance of LASPO, part deux.

Many injury lawyers at the time were up in arms, pointing out that they’d been singled out when others were already muscling in on their market.

Insurers and claims managers, including funeral directors, were getting involved in the chain at the root of any claim. The question that arose, whether they had the victims’ best interest at heart, was valid at least to some degree.

Injury lawyers indirectly roped into referral fee cases

At the time, the referral fee ban didn’t cover these professions; yet, if they were unable to address probate or other legally binding aspects, personal injury lawyers had to get involved.

Arguing in their own defence, personal injury lawyers claimed that they had no choice but to become involved. As their profession dictates, putting the victim first, they found themselves caught up in the referral fee process, albeit indirectly.

After the findings in June were published, the SRA did confirm that none of the injury lawyers they’d investigated had yet been brought before disciplinary boards. However, the possibility, they said, was not to be ruled out.

Fast forward to the beginning of August and the Justice Department’s web page covering the Jackson Review Civil Litigation Costs recommendations and implementation takes on a whole new pallor.

The named appropriate regulating committees now listed as responsible for upholding the referral ban on personal injury cases are the SRA and FCA and the Claims Management Regulator.

True enough, the ban is now applicable to:

“all of the main businesses involved – solicitors, claim management companies and insurers.”

In short, claims management firms still inviting referral fees are doing so against their code of conduct. In addition, they’re contravening the Civil Justice Reforms, measures that are (eventually) attempting to attain a restorative equivalence across both the system and the personal injury sector.

In order that claims management firms adhere to the referral ban, their regulator has issued a joint statement with the SRA.

With personal injury solicitors, insurers and claims managers now all towing the same line, presumably all now operating under guidelines similar to those frameworks already published by the SRA and FCA, stability may not be as distant a dream as lawyers thought after the initial introduction of LASPO.

The ‘fundamental reform’ of the ‘no win, no fee’ structure that followed the Jackson Review, namely the capping of fees for small claims, has not been mentioned in the Justice Dept.’s August online update.

The question there, however, is: will insurers be as interested in purloining small practises as we’ve seen in the recent restructuring of ABSs, now that they too have been warned against accepting referral ban fees?

That, we’ll have to wait to see. In the meantime, please avail yourself of the further reading linked to from the Ministry for Justice’s site, especially relevant if you are an insurer or claims management firm:
Full Justice Reforms: http://www.justice.gov.uk/downloads/publications/policy/moj/civil-justice-reforms-full-package.pdf
CMR, enforcing the ban: http://www.justice.gov.uk/downloads/claims-regulation/cmr-referral-fee-ban.pdf
CMR, quick guide for small businesses: http://www.justice.gov.uk/downloads/claims-regulation/cmr-referral-fee-guidance.pdf
CMR, F.A.Q.: http://www.justice.gov.uk/downloads/claims-regulation/cmr-referral-fee-ban-faq.pdf
SRA, referral bans: http://www.sra.org.uk/sra/policy/referral-fees-ban.page
FCA, referral bans for insurers and intermediaries: http://www.fca.org.uk/firms/being-regulated/meeting-your-obligations/firm-guides/insurance-intermediaries/banning-referral-fees-for-personal-injury-cases

That should give you something to get your teeth into over the weekend!