In today’s society you would be forgiven in thinking that the number of compensation claims in the UK is increasing. Very rarely does a week go by when there isn’t a news story about some form of personal injury claim, and the internet is full of adverts for ‘no win, no fee’ personal injury specialists.
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Last May, a mother and son from Stockport both incurred whiplash injuries after a learner driver smashed into the back of their car, as they sat stationary. The next day while recovering at home their received a house call from a lady from the insurance company, who said she wanted to talk to them about the accident. Questions were asked as to whether or not the victims wanted to make a claim within the next six months, and a form was produced for them to sign. Neither victim knew at the time that the form they were signing meant they were wavering their right to make a claim, and thus wouldn’t receive any compensation. Luckily their solicitor intervened and the insurance company was ordered to pay out £1,400 each to the mother and son for their injuries.
This type of situation is not uncommon, with insurance companies stating that often people want to sort out the situation as soon as possible, and prefer a pro-active approach to claims handling. But even if the victims are told that they have the right to seek legal advice, a cold call from an insurance representative may be too soon after the event for the victims to really have time to consider all of their options.
Others are outraged by this action, claiming that visiting a car crash victim directly after they have suffered an injury such as whiplash is unacceptable and visiting their home is inappropriate. Accident victims often are suffering from shock and stress and need time to recover before they are properly able to digest legal jargon relating to a claim. In particular a cold call from an insurance company may put undue pressure on the victim to sign forms that they wouldn’t have signed on speaking with a solicitor.
The question now is who should be regulating this kind of behavior? Should there not be a consumer watchdog to protect accident victims from this kind of intrusion when it is not wanted? The Financial Services Authority is one such body who could play this role, but at present they are not sure as to whether these situations do in fact need to be monitored. They claim that further research needs to be carried out into how insurance companies handle third party claims and whether or not this is a widespread issue.
Insurers do admit that getting to the third party victims before their lawyers is all part of their business model and driven by the desire to avoid having to pay any legal fees. Typically for every £1 that is paid out in compensation for an injury claim 40 pence goes towards legal fees. So it is clear that the insurers stand to make considerably more money if they can minimize this cost. But is cold calling the right way to do this? In order to make the system fair, accident victims should be made aware that they can say no when insurers come knocking on their door and that they always have the choice to speak to legal representation first.
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But new research - conducted by BBC Radio 4’s ‘File on 4′ programme - suggests that it is the very poorest sections of the community who lose out when seemingly failsafe claims go wrong.
Some people have been left in debt to the tune of £2,500. The industry looks like it was past it’s prime some time ago - in 2004, the personal injuries group Accident Direct sacked it’s 2000-plus workforce by text message after a slew of failed cases, whilst The Life Repair Group needed some major renovation work itself after it went into administration the previous year. Whilst the job losses associated with these companies’ collapse is bad enough for those afflicted, the real losers were the (for the most part) poor and ill informed customers that they targeted. For John and Lesley Pace of Pencoed, South Wales, they thought that Christmas had come early when they received a knock on the door from a representative of CMS Investigations, who had also been targeting homes in Northumberland and the Midlands.
They advised the Paces that they may have a compensation claim case against their local housing authority, as their council house had been damp and draughty for many years. They were advised to take out an insurance policy for £519 for legal costs in the event that the case was lost - a strange enough practice when the arrangement is meant to be ‘no win no fee’. This was paid for with a loan from the First National Bank.
The plot thickened when the Paces won their case and were awarded £1000 in compensation. Just a few weeks later, their delight was cruelly spoilt when they received a bill for £1481.86. Apparently, costly risk assessment reports vital to the success of the case had been performed at their expense, and coupled with the exorbitant interest charges added to the loan repayment, effectively meant that their fee was greater than their win - they owed money after going through the hassle and distress of a court case. Mr Pace put his opinion in no uncertain terms: “I’d love them [CMS] to come here and knock again. They’d be out through the gate before their feet could touch the ground”.
But their heartache hadn’t come to an end yet. The insurance policy that the Paces had taken out was designed to pay out only if they lost their case - because they won, they were still liable for the legal costs of the court case. These ended up being £8,697 agreed. Understandably, the Paces are outraged: “There’s no way I’m paying” Mrs Pace said. “I’d rather go to prison.”
It’s understandable that emotions are running high when such malevolent practices are still occurring in Britain. Before you get involved in the seedy world of ‘no win no fee’ compensation claiming, be sure to get your facts straight: you could end up paying more than you bargained for.
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