The Supreme Court has delivered a victory for personal injury lawyers, overturning a Court of Appeal judgement that held that insurers could go behind their backs and settle directly with claimants.
Supreme Court justices Lady Hale, Lord Kerr, Lord Wilson, Lord Sumption and Lord Briggs, who delivered the lead judgement, ruled today in Gavin Edmondson Solicitors v Haven Insurance that the solicitor’s equitable lien was enforceable, as his claimant clients owed a contractual duty to pay its charges.
Six victims of road traffic accidents involving vehicles whose drivers were insured by Haven entered into conditional fee agreements with Edmondson, who notified the claims via the online road traffic accident portal, in accordance with the pre-action protocol for low value claims.
Standard practice is for the insurer to pay fixed costs and charges directly, but Haven went straight to the claimants and made settlement offers that did not include costs. The insurer insisted that this method meant higher and quicker settlements for the claimants, who all accepted its offers, meaning Edmondson lost out on more than £10,000.
Edmondson launched proceedings against Haven for the fixed costs that he should have been paid under the protocol, specifically seeking enforcement of its equitable lien, which provides for the payment of fees owed by the client for the successful conduct of litigation, paid out of the fruits of that litigation.
The case was dismissed at first instance. On appeal, the Court of Appeal held that, even though the claimants did not have a contractual liability for Edmondson’s charges, which meant that the traditional equitable lien claim failed, the remedy could be modernised to allow him to recover from the insurer his fixed costs that should have been paid under the protocol.
The Supreme Court dismissed the Court of Appeal’s rejection of Edmondson’s equitable lien. Lord Briggs explained: “Once a defendant or his insurer is notified that a claimant in an road traffic accident case has retained solicitors under a conditional fee agreement, and that the solicitors are proceeding under the road traffic accident protocol, they have the requisite notice and knowledge to make a subsequent payment of settlement monies direct to the claimant unconscionable, as an interference with the solicitor’s interest in the fruits of the litigation.”
“The very essence of a conditional fee agreement is that the solicitor and client have agreed that the solicitor will be entitled to charges if the case is won. Recovery of those charges from the fruits of the litigation is a central feature of the road traffic accident protocol.”
Expressing the insurer’s disappointment with the Supreme Court’s decision, Joe O’Connell, claims director at Haven, stressed that “this case was not about whether insurers should settle directly with claimants”.
O’Connell said: “It was only about the claimants’ solicitors’ costs and it turned on a technical analysis of their retainers. The court did not criticise Haven in any way and there has never been any suggestion that the underlying claimants received any less than the compensation to which they were entitled.”
“In fact, Haven believes that they received more than they would have received had they settled their claims through solicitors. Haven has always acted fairly towards claimants and will continue to do so.”
O’Connell went on to say that Haven believes that it is in a claimant’s interest to settle directly with an insurer and “we will continue to provide an excellent service to those who choose to do so”.
“Claimants who deal directly with Haven will resolve their claims more quickly and are likely to receive more in compensation than they would if they involved solicitors, particularly as solicitors will deduct up to 25% from claimants’ damages to cover success fees and other legal costs.”
O’Connell added: “Haven strongly believes that every claimant has the right to decide how to deal with their own claim and that claimants should not be forced to use solicitors. We encourage any claimant to speak to us before committing themselves to instructing solicitors.”
“With the government proposing to significantly raise the financial limit for small claims, in future many more claimants will in any event have to bring claims without legal assistance. With our considerable experience of direct settlement, we believe that we will be able to provide a better service to claimants than many other insurers.”