An increase in influence

With shrinking insurer panels, imminent shake-up of the legal services market, and other governmental reforms, Neil McLaughlin did not have to procrastinate too long in devising his list of priorities for the next 12 months. As the new president of the Forum of Insurance Lawyers, taking over from Andrew Underwood at last month's annual general meeting, he intends to champion the value of defendant lawyers in the modern market, and lobby hard for legislative change to ensure opportunities are not missed to right wrongs in the compensation system.

On the subject of shrinking panels, the partner at Morgan Cole says: "There are no two ways about it, the number of litigated cases is down - all the statistics prove that. During the next 12 to 24 months, I am personally in no doubt at all that the number of fast-track cases will continue to drop."

Ongoing discussions between the Law Society, Department for Constitutional Affairs, Association of British Insurers, Foil and its counterpart, the Association of Personal Injury Lawyers, regarding changes to the whole process of dealing with fast-track claims are only likely to accelerate this trend, he believes.

"If this reform comes to fruition, and we have to hope it does, then it will drive down the volume of cases going to litigation again. Part of our role is to act as the information deliverer, even though some of these developments will not be welcome news to Foil members," he says.

"However, like it or not, it is going to happen and, as Andrew would say, you can't defend the indefensible. Some may question whether Foil is cutting its own throat by being involved with this type of discussion but the current system has so much wrong with it that to try to defend it, to try to keep it how it is and oppose change, would smash our credibility and smack of self-interest."

Leadership role

Consequently, Mr McLaughlin outlines his leadership role for the coming year as follows: "I will be looking to promote the role that the defendant lawyer plays in the process, and working with our members to help them understand all the issues that are going on, many of which are going to directly affect their business and portfolios of work. The challenges are coming from a range of directions."

One such source of commercial pressure is emanating from the insurance industry itself. "Quite rightly, insurers are looking to deliver the most cost-effective claims solutions for their shareholders, which include suppliers of legal services. Panels will continue to be reviewed and reduced - therefore we need to work with the system and promote the role of the defendant lawyer in different ways."

Apologising for the use of a cliche, he says it is all about 'adding value': "If our members cannot demonstrate that their intellect, their processes, and the quality they bring add value to the compensation system, then they will fall away and fail to do any business."

Equally however he points out that a "phenomenal range of initiatives" have already been undertaken by Foil members to ensure that they are winners, rather than losers, at the hands of market reform.

Joint ventures

For example, dozens of firms have entered into joint ventures with insurers to provide fast-track legal services, IT links often exist between the two businesses, while others have a team of their lawyers working in an insurer's office as an integral operational function, to ensure a smooth transition from pre to post-litigation.

"Our challenge in serving the insurance industry is to show, establish, and prove to our clients - insurers, local authorities and loss adjusters - that we should be employed, and that it's our service that should be used to fulfil part of their needs. Be under no illusion, there are many other non-lawyer organisations that are pitching for the same work and, going forward, that number will only increase with these reforms."

He highlights the impact of the Clementi review, and subsequent Legal Services Bill, as one area where he aims to disseminate information and detail developments to members. With the Bill set to be introduced next autumn, and primary legislation likely to come into force in the first quarter of 2007, Mr McLaughlin says: "I hope that none of our members are sleepwalking towards this. A key part of my role during the next 12 months will be to ensure that they are not, and that they fully understand the challenges that this legislation will bring."

Not wishing to suggest his role will be purely one of acting as the bearer of bad news, Mr McLaughlin emphasises that the Clementi review brings opportunities as well as challenges: "It strikes me that our members have faced competition from different sources for many years, with other types of companies seeking to do our work, in terms of pre-litigation claims handling or post litigation cases. So, in some ways, we are more geared up and ready than other aspects of the legal profession for the changing environment."

Consequently he does not feel this Bill will produce a big bang for defendant insurance firms. Multi-disciplinary partnerships, he says, are already a reality for many Foil members: "Many defendant law firms already employ a barrister, many have chartered insurers, and many employ in-house loss adjusters or forensic accountants. So much of what is anticipated to happen has actually been going on quietly and successfully for years, in a host of firms."

Another core issue, he says, is in ensuring that the quality of solicitor training is of the highest level, facilitating the attraction of talented individuals.

So, is the commercial squeeze, stemming from the falling number of litigated cases, and challenges surrounding profit levels that can be delivered by undertaking general insurance work, hampering this recruitment process? "There is a challenge for insurance law firms in terms of succession planning. Obviously I can't speak on behalf of every subscribing firm but, during the past few years, it has been easier for our colleagues on the corporate and commercial teams to recruit trainees and outside providers."

Claims regulation

And what are his views of the draft Compensation Bill? Does he unfailingly support the twin proposals of regulating claims management companies and tweaking the law of negligence - or does he view it more as a damp squib, driven by a political will of wanting to be seen to be doing something about current practices, rather than taking fundamental reform steps that could help shave the 40% of liability insurance claims costs currently swallowed up by legal expenses?

In terms of regulating the more odious practices, where vulnerable people are targeted to pursue cases with no prospect of success, which are subsequently abandoned, leaving them will hefty loans to pay, he welcomes the Bill. Equally, he believes it should help cut the administrative costs of insurers or self-insureds, such as local authorities, having to handle speculative letters of claim that are easily rejected as having no merit.

"Primarily the Compensation Bill was anticipated to introduce the regulation of claims farmers, and clearly this has happened in the proposals. The question now is how the final legislation is worded, and whether this will cure the illnesses it is intended to."

In his speech at Foil's conference, Conservative MP for Ryedale and chair of the All Party Parliamentary Group on Insurance and Financial Services John Greenway expressed his reservations about the Claims Standards Council's ability to effectively police the sector as a potential regulator. Does Mr McLaughlin share that view?

"It strikes me that whatever you call the eventual regulator is unimportant, it's just a title. What is important is the power that the regulator will have and the quality of the individuals that make up the body to uphold its standards and penalise those that breach them.

"Let's say, for arguments sake, that it is the CSC. All the discussions that I have had tell me that at the very least it will be a different group of people. It will also need a figurehead that will engender credibility on all sides."

New regulator

The CSC is currently being given the opportunity to show what it can do and demonstrate why it should be the regulator.

"So if, within a three or six-month period, it has not reached that threshold of persuasion, then Baroness Ashton and Lord Falconer will decide it needs a statutory regulator and set one up from scratch."

The second strand of the draft Compensation Bill - the government's intention to clarify the law of negligence in a bid to reassure organisers of 'desirable activities', such as school trips, and make them less fearful of legal action being pursued should an accident happen - has been deemed a "missed opportunity" by immediate past-president Mr Underwood (see p31). He has also highlighted the risk of satellite litigation, as parties seek to clarify whether an activity is desirable or not. Does this proposed section really change anything anyway, because the courts already take account of the value of such activities when claims reach trial, following the judgement in Tomlinson?

"It will come as no surprise to say that we are wholly underwhelmed by the proposal for section one," says Mr McLaughlin. "However, Baroness Ashton has made it clear she is very wedded to the wording, describing it as small and beautiful, and that she will do everything she can to get the Bill through in its current form.

"Therefore, we face an enormous challenge, bearing in mind that the minister responsible for getting it through parliament wants to see it in this form."

Right to compensation

In its response to the draft Bill, Foil has detailed various areas that it believes should also be incorporated into this section, for it to have any prospect of real impact in reducing spurious claims.

"It is not possible to simply remove section one altogether, as that would affect the integrity of the entire Bill. The question to answer, therefore, is how it should be expanded and clarified."

Foil believes, for example, that the law of trespass should be examined. "We have seen high-profile cases where people have been caught committing criminal acts and trespassing, and still received compensation.

In our view this needs to be addressed - if someone injures themselves while committing a criminal act, this should deny them the right to compensation."

It has also looked at the issue of drunkenness. "If a person willingly gets into a car with someone they know to be under the influence of drink this does not currently deny them the right to compensation if they then get injured in the process," he explains.

Another potential aspect for inclusion, in Foil's view, centres on the issue of fraud and claims exaggeration. If people are to be deterred from viewing insurance fraud as a victimless crime, Foil believes the Compensation Bill should seek to eradicate the ability to secure damages, where evidence has proven the case to be exaggerated.

"At the moment, in personal injury claims, the law does not permit the judge to rule that the fraudulent or exaggerated part of a claim taints the whole," explains Mr McLaughlin. He reports that where surveillance or other evidence proves injury claims are by no means as serious as claimants have made out, damages are then simply reduced rather than removed altogether.

"If someone is minded to bring such a 'lottery claim' there is very little consequence for the individual concerned. The perception is that they have nothing to lose and everything to gain. For example, they can enter into a conditional fee agreement, buy some after-the-event insurance cover and put in a claim for £250,000 - even if they then only receive £20,000."

Tabling amendments

This ability to taint a claim already exists in insurance contract law, and Foil would welcome clarification on this issue in the personal injury arena.

"This would be worthwhile to pursue, as the issue of exaggerated claims is the source of enormous frustration to insurers.

"It would certainly focus minds on the truth element of claims and, therefore, what the realistic schedule for damages should be. After all, these schedules drive the reserve levels that insurers have to put with a claim."

With the final wording of the Bill expected in January, Mr McLaughlin explains that the next step will be to table amendments: "All that those of us on the outside can do is lobby MPs and the Lords."

Bearing in mind Baroness Ashton's belief that, as it stands, the Bill is small and beautiful, he adds: "We recognise that it will be an uphill struggle to get amendments made. That said, John Greenway is certainly a robust character, and if he wants to see changes I can't imagine he will allow himself to be pushed over.

"He has already signalled that he has significant reservations about this clause as it stands."

Under recent presidencies, Mr McLaughlin believes that Foil has strengthened its lobbying credentials, stating that it is now regularly called upon by government departments to respond to proposals for legislative and regime change.

He appears determined that this level of influence should only increase.