No win no fee

No win no fee

No win no fee is not an accurate term, and it does not tell you the whole story. The whole story might be boring, but until you have heard it you will not understand. Your only question is “Will it cost me anything?” to which the answer will be “It depends.” So read the whole story and understand.

In our compensation the successful claimant usually receives compensation and has their legal costs paid by the other side, the defendant. The other side is usually insured. Having your costs paid is not an automatic right. It is either build into any settlement you reach, or it is at the discretion of the trial Judge. There is no guarantee, but usually costs follow the event, which means the loser pays.

The amount of the costs you can recover depends on what is called the indemnity principle. The party paying costs will be reimbursing you for the amount you are contractually bound to pay to your solicitor. Your solicitor cannot just present a bill and expect a cheque. So you must be liable to pay your solicitor, as without that liability you cannot be indemnified by the other side. They cannot cover your bill if one does not exist.

So when you sign up to a “no win no fee” agreement you will be signing a document which says you will pay £X per hour plus VAT in the event that the case succeeds. You become liable to pay when your case succeeds, and the other side will effectively pick up your bill.

What about the possibility that your case fails. The “no fee” bit only covers your own solicitors hourly rate, and any success fee. What about your own disbursements, and the costs and disbursements of the other side. A very clever form of insurance was created to deal with this problem called after the event insurance. It insures this risk in return for a premium, and is banking on your own solicitor’s judgment. Surely they would not be running the case if it is not going to succeed? Well that is usually the outcome, but the odd one goes wrong, and you will be glad the insurance was taken out. The premium for this insurance can be recovered from the other side if the case succeeds, and as many insurers will wait until the end of he case to be paid, there is no good reason not to take out this insurance. The only reason why this insurance is not so grand is that the cover it provides can be limited. An indemnity level will be set at the outcome, say £25,000, and that is the maximum the insurer will be liable to pay. This level can sometimes be increased, but there is no guarantee and an increase can be expensive, and not necessarily recoverable from the other side. Best you get the level of cover right in the first place. Once you have the policy the cover is reviewed. The insurer must always be satisfied the case has reasonable prospects of success, so if the balance tilts away from you, the insurer may pull out. Rather like insuring a car, but having to phone your insurer if the weather forecast is bad. On balance you ought to have this insurance, on the basis the why not argument is stronger.

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Author: Mark Thompson

Personal injury and accident specialist solicitor

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