Peanuts..

Last month I wrote about the case of the Manchester motorbiker whose Bristol solicitors, appointed by legal expenses insurers, settled his case for £500,000 – when as subsequently demonstrated it was worth £1 million+ - http://legalchap.blogspot.co.uk/2012/08/panel-beater.html

This month the Law Society Gazette reports on the rise in professional negligence claims against personal injury law firms citing “reliance on under-qualified staff, a lack of face-to-face contact with clients and failure to understand medical reports” as “all factors in the trend”.

Surrey firm BakerLaw reported a recovery of £700,000 for a client whose original solicitors had achieved an award of £16,000.

An associate at Withy King who said one claim was worth nine times the £10,000 settlement agreed by other solicitors added that most claims were by victims represented by panel solicitors located in a different part of the country.

Another professional negligence lawyer spoke of “the proliferation of claims lawyers where there are just one or two partners and a bank of paralegals” generating the problems.

None of this is surprising. The flat, wide pyramid structure represents a risk in many types of business. In an environment where an element of judgment informed by experience will always be required, it signals failure.

Why do it?

Many of these firms are trapped in the business model created by legal expenses insurers whose policies sell for peanuts and only buy monkeys.

It’s not a universal problem. There are decent panel lawyers and there are BTE insurers who cut a fair deal. See for example http://legalchap.blogspot.co.uk/2011/08/bte-angels.html

But in my experience the good guys are the exception and the evidence is beginning to show that so many who have taken the insurers’ shilling and sold their souls are delivering a shoddy service.

From the victims’ point of view, that is.

What about insurers? Well it looks fine for them. They are driving the price of legal services down to increase their margins and passing the risk to professional indemnity insurers – by and large a different market.

Another commentator has made the valid observation that some if not all of these wicked under-settlements are driven by liability insurers who care nothing about injured people, their representatives or their indemnity insurers.

One hopes that (indemnity) market will quickly decline to continue underwriting the risks generated by law firms who facilitate the greedy aspirations of insurers with no care for the standard of service delivered to injured victims.

Until then this problem will only grow worse.