GROWTH IN DAMAGED BASED AGREEMENTS WOULD FURTHER HIGHLIGHT LEI BENEFITS

The role of Damaged Based Agreements (DBAs) in personal injury litigation funding is an area that Arc Legal has regularly commented on, particularly in relation to their impact on the damages that policyholders receive. Since DBAs were introduced as part of the Legal Aid, Sentencing and Punishment of Offenders Act (LASPO), we have seen a number of instances where policyholders have had deductions taken from their damages after deciding to use their own solicitor to pursue a claim rather than utilise an Arc Legal panel firm under their Legal Expenses Insurance (LEI) cover.

DBAs are again in the spotlight following proposals by the Chancellor of the Exchequer to tackle the compensation culture and control personal injury claims costs. In his 2015 Autumn Statement, the Chancellor outlined plans to curb whiplash claims and to increase the personal injury small claims court limit from £1000 to £5000.

While no final decisions have yet been made on what actions will be taken, an increase in the limit would see significant numbers of motor related personal injury claims fall into the small claims court system. The fact solicitors would be unable to recover costs for these kinds of claims means many will turn to using DBAs or utilising LEI to fund cases.

Under a DBA, a solicitor will be entitled to costs of up to 25% of a claimant’s compensation in the event of a successful PI claim; effectively eroding their compensation. However under an LEI policy, policyholders are entitled to keep 100% of any compensation or damages they are awarded, as well as coverage for all the legal costs incurred in making a claim.

We continue to advise any policyholder who decides to instruct their own solicitor to pursue a claim, not only about the exposure to legal costs from their damages, but also the coverage available under their legal expenses policy where a panel firm is used.

For further information about DBAs and the potential impact for claimants, please contact your account manager.