Don’t worry. I am not talking about us here – we have never been so busy. Why is that do you think?
Well, we are finding that some solicitor firms are finally waking up to the fact that their current After the Event Insurer won’t cut the mustard come April 2013 and are rapidly jumping ship. They have realised that they need an ATE Insurance provider who will fit their amended business model and provide no-fuss affordable policies which require no additional admin. We have also found firms who were working with ATE insurers who weren’t exactly playing by the rules. They were providing solicitors with what is commonly known as ‘Hold Harmless’ policies or hiding commissions. ’Hold Harmless’ cover is where the solicitor agrees to never claim on the policies. In return they get a whacking great commission.
Now we (and the FSA, SRA, MoJ, Law Society, Uncle Tom Cobley ’n’ all) consider such arrangements to be illegal and a fraud on the client and defendant insurer. Well – another nice side effect of the Jackson reforms is that these policies are not going to be able to be workable anymore. Why? Well the client is going to pay and, under the commission rules, solicitors have to declare to the client any commission they earn AND tell the client that the money is in fact theirs to keep unless they agree in writing that the solicitor can keep it. Up until now, most clients have been happy for the solicitor to earn a commission from the ATE policy (after all this is normal for all insurance), however, which client in their right mind is going to agree to a solicitor making a large commission from an insurance policy that the client themselves is having to pay for?
Now some naughty solicitors have not been telling their clients about all of this money they are earning and may be tempted to keep on doing this. No problem they think. If they get caught then they can simply get permission later. We have come across quite a few of these. Well, bad news I am afraid.
You can only get the client’s permission before you earn the commission so, if you don’t comply with the rules, none of the commission is yours. And when I say none, I mean none. We know of at least one firm where the SRA spotted this ‘omission’ and made the solicitor send clients the commission they had earned on all of their files, going back 4 1/2 years! It nearly bankrupted them.
So you see, there are a lot of solicitors out there sitting on a time bomb. There are also insurers out there who will have to offer something a little more meaningful than just silly commission levels after Jackson comes knocking.
What is the moral of the tale? Well, make sure you work with a reputable broker who knows what they are doing (maybe even one set up by PI solicitors) and one who offers a decent and ‘above board’ product. If you haven’t declared commissions or have one of those illegal ‘Hold Harmless’ policies then I suggest you sort it out. Quick.