Box Legal was formed by Simon Pinner and Daniel Morris in the summer of 2004 and while the weather feels a little the same then as it is now, it was a particularly wet August in 2004, the litigation landscape is of course very different. But exactly how have the risks that we arrange insurance for changed over the last 20 years?

Well, first the number of personal injury claims being pursued, as notified to the CRU, has fallen, but maybe not by as much as you might think. In 2004/2005 there were 755,875 personal injury claims reported to the CRU as being pursued, while in 2022/2023 that had dropped to 484,330.

This does not of course tell the full story. The number of personal injury claims being pursued had been steadily increasing in 2004, peaking in 2012/2013 at 1,048,309 recorded claims, whereas numbers have been steadily declining since 2013 and then more dramatically after 2021.

However, what the bare numbers do not also reflect is the type and average size of each claim being pursued. With the introduction of the Whiplash Reforms in 2021, which came with an the increase in the small claims/fast track claim threshold, and then the extension of fixed costs regime in 2023, there has been a marked shift in the cases we see being insured. The number of motor claims has fallen dramatically, for obvious reasons, and the number of higher value non-motor personal injury and clinical negligence has increased significantly.

The change in risk pattern for us as an insurance broker and for solicitors pursuing these different claim types and size is marked both in the failure rate and the cost of disbursements incurred in order to support these claims.

On average, our data suggests that around 5% of motor claims where instructions are accepted fail with disbursements incurred, while this figure increases to 10% for non-motor claims and up to 35% for clinical negligence claims. Together with the additional cost of expert reports, court fees, etc required in both higher non-motor and clinical negligence claims this leads to a significant increase in exposure.

From a legal expense insurer’s perspective this increase and disbursement exposure has been offset to some extent by Qualified One-Way Costs Shifting (QOWCS), introduced by the Jackson Reforms in 2013. While disbursements have always made up the largest element of overall claims paid, even when personal injury costs were assessed on a standard basis, the introduction of QOWCS significantly reduced the amount of adverse costs incurred by personal injury claimants paid in claims against their Claimsafe legal expense insurance policies.

This was of course Lord Justice Jackson’s intention and was provided as a consequence of the claimant’s loss of ability to recover success fees and ATE legal expense insurance premiums. Although there does of course remain a risk that claimants may lose damages by having to pay defendants’ adverse costs in the event that they fail to beat a part 36 offer, a risk negated by having an ATE legal expense policy which by consequence therefore strengthens their bargaining position when offers are made.

QOWCS does not, however, protect solicitors from what can be dramatic increases in the cost of disbursements.

Following the Access to Justice Act 1999, the PI market quickly settled on a no win no fee model whereby claimants received full damages with no deductions and almost universally claimants were not required to provide money on account for disbursements as these would be funded by the solicitor. Even where no legal expense insurance was in place, CFAs were generally worded so that not only would costs not be payable by the client if their case were lost, but neither would the disbursements the solicitor had fronted.

Very generous when you think about it, but with full costs assessed on a standard basis and success fees being received by solicitors in successful claims this was economically viable and from a marketing perspective very sensible. It places no barriers on clients instructing a firm. Any financial burden, whether immediate with the need to provide money on account or a risk of in the future having to pay disbursements of £500+ if their case is lost in even a modest case, is likely to discourage a sizeable proportion of potential clients from making a claim.

However, solicitors have of course since faced the introduction and then extension of fixed costs in PI claims. First in 2013 and then more recently in 2023, both of which have significantly reduced the income a PI department can generate.

There is therefore much less capacity for firms to fund disbursements in lost cases pursued by way of a CFA, which is of course where ATE insurance can help. With the addition of a relatively small premium, deferred so only payable if the policyholder’s case is won, an insurer, instead of the solicitor, can spread the risk of disbursements across successful claims allowing the solicitor to retain all the costs they recover to improve their profit margins and to continue offering their services.

So access to justice is preserved. All potential clients, no matter their financial circumstances, can afford to pursue a claim, albeit at a far greater cost to those claimants whose case are won. Success fees, unrecovered costs and ATE premiums must now be deducted from damages in successful claims to enable their solicitor to offer their services through a viable business model. This, however, is how the Government now believes victims should be compensated.

We at Box Legal Ltd have been offering a range of ATE legal expense insurance policies to cover personal injury, clinical negligence and many other types of litigation for 20 years. We can provide policies with a variety of premium structures to suit all circumstances and with 95% of claims paid in full, a Claimsafe ATE legal expense insurance policy provides cover that both you and your clients can trust to pay adverse costs in the face of an offer on damages or all disbursements if the case is lost outright.