By: 23 December 2016
More than half of claimant firms will be forced to shut down if small claims reforms go through, says First4Lawyers

A snap survey conducted by First4Lawyers has found that more than half of claimant firms will be forced to shut down or look for other work if the Government’s proposal to raise the small claims limit goes through.

The CMC also said that the legal profession had to unite and mobilise now if it was to save access to justice for injured people after it also concluded that Lord Justice Jackson’s separate review of fixed recoverable costs could then put the remaining firms out of business.

First4Lawyers surveyed 71 firms in the wake of last month’s Ministry of Justice proposals to increase the small claims limit for PI claims from £1,000 to £5,000, and remove general damages for minor whiplash claims. 41% of firms said they would have to shut down the whole firm or the PI department if the small claims limit went up as proposed. A further 24% said they could adapt and survive – but only if the increase was limited to road traffic claims. The Government’s stated preference is for it to apply to all PI claims.

A more optimistic 17% of claimant firms saw opportunities to advise those with what would be small claims, while 11% predicted that they would take a hit, but were sufficiently diversified to survive it.

The survey also did not show huge confidence among solicitors in those representing them. Asked which group they had the most confidence in to represent their interests to the Ministry of Justice, the Association of Personal Injury Lawyers (APIL) and pressure group Access to Justice came top, but with only 30% each – just 8% were looking to the Law Society.

Qamar Anwar, managing director of First4Lawyers, said: “This is a moment of existential threat for many claimant firms. The government needs to understand that in its pursuit of a mythical £40 off motor insurance premiums, it is stripping the injured of their rights to justice and causing serious damage to thousands of hard-working professionals who are doing no more or less than upholding the law of the land.

“We will be responding to the consultation, but only half of the firms surveyed said they would too. Every claimant solicitor needs to make their voice heard to stop these deeply damaging reforms. And those representing them need to stop treading carefully and instead pull out all the stops to protect the rights of injured people – and of their own members.

“There are already signs of the kind of infighting that will ultimately be fatal to all – some solicitors are trying to pin all the blame on claims management companies, but scapegoating will not achieve what they want and will instead play into the hands of the Association of British Insurers. Yes, the excesses of a handful of CMCs need curbing – and we fully back a total ban on cold calls and texts – but equally ethical, regulated CMCs provide a valuable service.

“We should not be fighting among ourselves – instead, we should train our focus on the unfair, misleading and profit-driven campaign run by the insurance industry that has got us to this position.”

The survey found mixed views on the likely outcome of Lord Justice Jackson’s review: 37% predicted that it would lead to fixed recoverable costs (FRCs) on the multi-track – although they were split on whether the upper limit would be claims worth £100,000 or £250,000 – while 23% expected FRCs to be limited to the fast-track. One in seven thought the judge would realise the task was much more difficult than expected and that change would be limited.

If there is a significant extension of FRCs, a third of respondents said that, on top of the government reforms, it would be the death knell for many PI firms. Another 37% said that FRCs would be fine if set at a reasonable level – but they had no confidence this would happen.

Qamar Anwar added: “Whether or not the PI reforms were co-ordinated with Lord Justice Jackson’s review, the combination comes across as a concerted attack on claimant lawyers. And all the while, insurers are laughing and enjoying bumper profits.”