Government urged to ban payments by lawyers to intermediary businesses in response to whiplash consultation

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The Government should place a ban on payment by solicitors to intermediary businesses with respect to any personal injury case if it wants to stamp out fraudulent or exaggerated claims.

John Holtom, a consultant solicitor at Legal Solutions Partnership, has said that issue of suspect claims in the PI sector is down to the amount of intermediary businesses who benefit from them.

In his response to the MoJ consultation on whiplash claims, Holtom has said that the problem in PI claims date back to the mid-1990s – as does the solution. In his response, he says that the relationship between the boom in the income of CMCs and other intermediary businesses, and the rise in claims, is patently clear from the statistics.

“The removal of the business cause for the claims-made boom will result in the boom ending,” wrote Holtom in his response.

“The plethora of fraudulent, exaggerated and trivial claims will abate rapidly by applying a solution staring everyone in the face: removal of intermediary businesses completely from the legitimate Personal Injury claims business.”

Holtom says that banning payments by solicitors or any other SRA authorised or other non-SRA regulated legal services businesses, including ABSs, and including FCA authorised insurers, to any other party with respect to any Personal Injury claim, including claimants themselves, would result in the Government achieving its aim of phasing out fraudulent and exaggerated claims.

He said that the ban should apply to acquisition of cases in all forms, including referral, introduction, recommendation, retention, and data-passing. It should also not be time limited and so can cover payment made before, during, or after conclusion of a claim.

“[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,” added Holtom.

“[The ban]would extend to any and all intermediary businesses. Criminal sanction will be necessary to depress the voraciousness of the claims capture businesses of all kinds.”

Holtom says that intermediary businesses include: CMCs, medico-legal businesses, marketing businesses, ATEs, accident management businesses, insurance company outsourced marketing business, subcontractors and linked businesses (including ABSs), insurance companies, insurance brokers/intermediaries, and insurance company claims handling businesses, and businesses that are part of, or linked to, insurance owned ABSs.

“The effect of removal of any payment by solicitors to intermediary businesses with respect to PI claims would dramatically reduce the number of claims brought,” said Holtom.

“This would achieve the Government’s aim without dismantling the long established and legitimate claims framework.

“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 (lawyers, Claimants, doctors, insurers, the Civil Justice system, Government), without any measurable benefit accruing, except to the middleman.”

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Marek Handzel

Marek Handzel is the editor of Claims Magazine. Marek welcomes articles, letters, or feedback from readers and can be reached by emailing marek.handzel@barkerbrooks.co.uk