Hello there. I am back.
We had a lovely week in the French Alps. Fantastic weather but only snow quite high up so the children had to go in the cable car every day to ski school whilst the poor old parents sat outside drinking espressos at 3 (where's my Euros symbol?) a pop. We shall go earlier next year.
I thought I would talk today about disbursements as I think these are not really seen as a risk for clients (everyone focuses on adverse costs) but they are very important.
We have carried out an analysis on claims paid since we set up our scheme some 7 years ago. It may surprise you to know that the average
disbursement claim paid out is nearly £1,900! Don't forget that is the average - if you look at the top 25%, it is over £5,000 per claim and the worst ever was for just over £16,000!
I think it was good old Lord Jackson who suggested that solicitors would be happy to shoulder these expenses and absorb them into the overheads of their business models. This was generous of him - particularly as he has effectively taken away the success fee (clients will shop around for the cheapest one). I don't think many firms are going to be happy to pay £1,900 per failed case let alone £5,000 or even £16,000!
And it gets worse....
The number of claims are likely to reduce (less money for solicitors = lower ability to pay referrers = less referrer profit = less claims) and we all know what happens with supply and demand on services. If a company is supplying engineer's assessments and is doing 5,000 of them a year, they can keep their prices low due to high volumes. If instead they are only doing 3,000 a year, they still have to cover their overheads and so, to keep profitable, their prices will have to rise. It's the old 'pile it high, sell it cheap' Woolworths analogy in reverse (and look what happened to them).
So we think disbursements are going to rise - and that's not all....
Our legal expert, Jon Gouldsmith, pointed out something interesting to me. A lot of our claims involve barristers who have acted on a CFA and so when they lose, they have waived their fee. Well, success fees for barristers won't be recoverable from the defendant post-Jackson, just like the solicitor's success fee. It will be a client expense and so we think clients won't like them and nor will barristers. They will go back to standard fee paying arrangements which means their fees are going to be added to the disbursements which the solicitor has to, er write off (this means pay of course!) in the event of a loss. Our calculations show this will add about 15% to the disbursements liability.
So the bad news is, clients are going to have to be told that they face an average disbursements liability of £2,000 odd and a worse case scenario of, say £18,000 based on our figures. Some solicitors may want to ask for money on account for this.
OR, clients could buy a useful thing called After the Event insurance!
Box Legal Limited: After the Event Insurance Providers
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