Whiplash reforms: CMCs have 'hijacked' the provision of legal services

Case management companies ‘steal and market spurious legitimacy’ to the detriment of the entire personal injury sector, a solicitor has argued, before laying the blame for a failure to eradicate referral fees at the doors of the Ministry of Justice, SRA, and Law Society.

Solicitor John Holtom of Legal Solutions Partnership, part of Freeman Harris, told Solicitors Journal that the hijacking of legal services by CMCs and other businesses was the ‘true poison’ that has gone ‘unassessed and unaddressed’ by 102 Petty France and most lawyers.

In his response to the government’s consultation on whiplash reforms, which closed on 6 January, Holtom said that the business of PI had become ‘disreputable, intrusive, [and] a matter of embarrassment to practitioners’, but that the ‘misguided’ proposals amounted to ‘tear[ing] up social justice and reward[ing] the insurance industry which has profited from the mess’.

Despite LASPO barring the payment of referral fees in PI cases, Holtom said the Act’s provision had been unsuccessful in eradicating the practice. Instead, the consultant solicitor has proposed the banning of all payments by solicitors to all parties, including claimants and those acting for or assisting them.

‘The ban has failed. Perhaps worse than failed, having resulted in the MoJ, and other regulatory bodies, colluding and complicit in the approval of business structures that circumvent the referral fee ban,’ he added, before calling out the SRA and Law Society for helping to define referral fees, ‘the unintended consequence being structures that operate now as legitimised non-referral fee structures which are, as everyone knows, referral fees in everything but name’.

On his own proposals, Holtom said the ban ‘will not be limited to direct payments but commissions, discounts on fees charged, or any other mechanism that would enable solicitors to pay for acquisition of PI claims,’ adding that the prohibition would extend to any and all intermediary businesses and that criminal sanction will be necessary to ‘depress the voraciousness of the claims capture businesses’.

Holtom called for the Claims Management Regulation Unit to be disbanded, arguing that the MoJ had avoided addressing the extent to which the CMC regulatory structure feeds the ‘distortions and manipulations’ that have led to the reform proposals.

He also called for legislation authorising CMCs to be repealed and took aim at database sales by insurers, which, he suggested, has fueled trawling of personal data, and ‘likely to constitute data protection offences and require more effective investigation and prosecution’.

‘Breaking the symbiotic (or parasitic) relationship between solicitors and intermediary businesses will have substantial fall-out,’ said Holtom. ‘This addresses the fundamental need to remove the incentive for the middleman to profit, the core issue, that profit being at everyone else’s expense, without any measurable benefit accruing, except to the middleman.’

Concluding, Holtom said: ‘It would be a travesty of any form of justice for the MoJ to make decisions about the future operation of the PI market without addressing head-on the truth that payments of fees (in all forms) to intermediary businesses is the driving force of everything that is wrong.’

Also responding to the consultation last week, Hodge Jones & Allen warned that the young, elderly, the disabled, and those for whom English is not their first language, will all be disproportionately hit by the government’s reforms.

Patrick Allen, HJA’s senior partner, described the proposals as ‘scandalous’ and would take money out of the hands of innocent accident victims and into the pockets of insurance companies.

‘The government admits that insurers will receive a £200m windfall on top of any supposed reductions in motor insurance premiums,’ he said. ‘But history shows us that insurers will not pass on any savings – since the last set of reforms in 2013, premiums have gone up and so have the profits and dividends of all the major insurers.

‘The proposals are based on alleged fraud and exaggeration but the government has no evidence to back this up – even the Association of British Insurers now accepts that fraud levels are as low as 0.1 per cent of all claims,’ added Allen.

HJA suggested that should the reforms go ahead, more pressure will be placed on the NHS as well as employers, because injuries could last longer than they would otherwise have done.

Like many other respondents to the consultation, the Law Society once again warned that the reforms would restrict access to justice. President Robert Bourns said: ‘The Law Society wholly opposes any attempt to remove the right to compensation for injuries caused by the negligence of others as this is a fundamental legal right.

‘Ordinary people who have suffered minor soft tissue injury, including injuries sustained in non-motor accidents, need expert legal help to navigate the court system and understand medical evidence. People who have been injured rely on solicitors to help them secure compensation they are entitled to.’

Bourns said the government was ‘misguided’ in its belief that raising the small claims limit for to £5,000 and abandoning general damages for ‘minor’ whiplash injuries will stop fraudulent.

Chancery Lane also warned of a David versus Goliath tussle if the reforms went ahead, with no equality of arms available to injury people facing off against well-funded insurance lawyers.

John van der Luit-Drummond is deputy editor of Solicitors Journal

john.vanderluit@solicitorsjournal.co.uk | @JvdLD