How are personal injury solicitors paid?
There should be no mystery about how a personal injury solicitor is paid for the work carried out in your personal injury claim for compensation. You as the client must be given detailed advice.
Please note this page applies to personal injury cases with funding arranged before 1 April 2013. Funding means that agreement as to how you will pay your solicitor and deal with the risk of paying the other side’s legal costs has been finalised. For cases funded beyond 1 April 2013 do read this page for general guidance, but then click here as the law has changed quite significantly.
The basic cost is an hourly rate multiplied by the time spent on your case. Most personal injury solicitors will follow the Guideline Rates set by the Advisory Committee on Costs. These are based on the experience of your solicitor and the cost of practising in the various regions of the country, London being more expensive than Exeter for example .
A solicitor’s bill is made up of a charge for their time, plus VAT, and the expenses incurred on your behalf, known as disbursements. For these purposes I will put all those terms together and call them solicitors costs.
I will also talk about the costs of the other side, or the Defendant. That means the person or organisation against which you are claiming compensation.
There are fixed costs rules in place for certain types of case, such as road traffic accidents with value below £10,000, and I will deal with these separately.
You will be told that the costs will be paid by the Defendant, the other side in your case, if the case is successful. The confusing part is that you sign up to a deal saying you are liable to pay your solicitor’s fees, and the reason is you must be liable to pay these costs for your solicitor to be paid by the other side. A costs award is based on the other side covering your liability to your own solicitor. If you are not liable to pay your personal injury solicitor, your solicitor cannot be paid. It is called the indemnity principle and must be carefully explained to you.
Even if you are represented on a no win no fee arrangement, properly called a conditional fee agreement, you are liable for your solicitors costs in the event of the case being successful. If you fail you do not pay for the solicitor’s time, but you are liable for your solicitor’s disbursements and the costs of the Defendant.
Some personal injury solicitors still follow the practice of insisting on being paid for every minute they spend on a case. The other side must pay on the basis of the work which was necessary, but your liability to your solicitor is based on the work which was reasonable and necessary. Some solicitors insist on you making up the difference between the time they have spent and the time they have been paid for by the other side. That can produce a nasty sting at the end of the case. It is vital to know how your personal injury solicitor will charge, and to be sure you will receive all of the compensation.
So hopefully that makes sense to this point. Your case has been successful, you receive the compensation and your solicitor is paid by the other side.
But what if you do not win, or do not win completely?
If your personal injury case is unsuccessful you will be responsible for your own solicitor’s fees, and those of the Defendant’s solicitor.
So how do you avoid the risk of paying your own personal injury solicitor if your case does not succeed?
The answer is an insurance policy provided in the form of trade union support, legal expenses insurance, or after the event insurance which supports a conditional fee agreement. All of these forms of insurance are designed to cover your liability to pay costs in a personal injury compensation claim.
Each form of protection will depend on its own terms, but in general the insurer has agreed your case has a reasonable chance of success, and will cover your liability for costs if the personal injury case goes wrong. As with any policy check the amount of cover you have as there is always an indemnity limit.
Please carefully note you have duties under these policies. You must be honest and cooperate with your solicitor. If your case fails because you were dishonest your insurance would not pay, so be honest.
Can I carry on with my case if the chances of winning are not good?
It is here where we see how these various types of legal cover actually work. The insurer must be satisfied at all times that the prospects of success are reasonable. If something changes, such as a witness no longer backs your story, the insurer can back out and refuse to continue to cover you. So you have an insurance policy, but it is a fluid insurance policy, as once the chances of success reduce below the required standard the insurer can pull out.
The most common reason for the insurer to review its position is when you are made an offer. You might be offered 50:50 on liability, which means you and the Defendant are equally to blame for your injury. You might be made a financial offer which the Defendant thinks is reasonable. When that offer is made you can accept it and the Defendant will pay your costs. You can refuse the offer and press on, but if the ultimate agreement or award is less than you were offered you will only get your costs to the date of that offer, and beyond that offer you are liable for the costs of both sides. In practice this is the greatest risk in a personal injury case and it is on this point you must be sure you have good insurance protection, as a straightforward case can go bad if a good offer is refused.
A good policy and a good personal injury solicitor are your protection in a personal injury case.