A national firm has been denied its entire £30,000 success fee because it failed to make proper checks on whether its client had insurance cover.
Senior Costs Judge Rowley ruled in Evans v Fletchers Solicitors Ltd that the personal injury client could have used the before-the-event insurance policy he was entitled to as part of his home insurance with Zurich. Instead, the court heard Fletchers immediately signed him up to a conditional fee agreement in 2017 and charged the full success fee after the claim was settled for £250,000.
Rowley said Fletchers had made ‘desultory enquiries’ about the home insurance without even getting through to the associated legal expenses insurer. What enquiries were made came two years after the client’s accident, and the judge said there should have been a more concerted effort to establish the insurance provision.
He added that the correspondence from Fletchers was ‘drafted in a way which sought to encourage a lacklustre response from any potential LEI insurer so that the existing CFA arrangement was not disturbed by any putative cover’.
‘If the correspondence to the Zurich is anything to go by, the seemingly stock letter enquiring about the possibility of BTE cover was designed to produce a negative response.’
While there was no certainty that the home insurance policy extended to personal injury claims, on the balance of probabilities Rowley found that some insurance cover would have been available.
The judge accepted that the indemnity limit of £50,000 in the home insurance policy was insufficient to cover such a significant claim. But he pointed out that even the after-the-event insurance actually taken out by Fletchers had an indemnity limit of only £100,000, which was itself insufficient to take the case to trial.
The claimant told the court that if he had been made aware that instructing a solicitor associated with his legal expenses policy through Zurich would have resulted in less money being deducted from his damages than instructing Fletchers, there was ‘no doubt’ he would have taken that course. The judge said there was no reason to doubt this.
Rowley concluded that the success fee would not have been incurred if the BTE policy had been used, and on that basis, he disallowed the success fee in its entirety.
A spokesperson for Fletchers, which was bought by a private equity house in 2021, said: ‘We respect the court’s decision, although we are disappointed with the outcome and are considering the judgment carefully at this stage.’
The costs challenge was led by Leeds firm JG Solicitors Ltd. Following the judgment, JG Solicitors managing director James Green said it serves as a clear warning that firms cannot place clients into CFA arrangements without first carrying out proper enquiries into whether suitable legal expenses insurance is available.
Green added: ‘In an era where many firms operate highly standardised funding processes, the judgment is a reminder that investigating alternative funding options is not a box-ticking exercise. If appropriate enquiries are not undertaken, firms may ultimately find themselves unable to recover substantial additional liabilities from their clients.
‘The decision reinforces the principle that clients should not be asked to pay for funding arrangements they never needed in the first place.’
