June 18th, 2010 | 
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A no win, no fee agreement is now the most common way to handle the finances of a legal claim for compensation, for example after an accident. It is used in many cases in which legal aid would previously have been used. “No win, no fee” is more of a marketing term and the more formal name for the system is “conditional fee agreement”.
The “no fee” element only applies to the legal fees for the solicitor handling the case for the person bringing the claim. If the case is unsuccessful, the person will still often be ordered to pay the fees of the person or company they brought the case against.
Where does insurance come into it?
As many people bringing compensation claims would not be in a position to pay the opponent’s legal fees if they lost, most companies using a conditional fee agreement will ask the person to take out an insurance policy against losing. This is known as after the event insurance. The name is slightly confusing as the insured risk — losing the case — happens after the insurance policy is taken out. In this context, the name instead refers to the original event, namely the accident, upon which the court case is based.
What are the drawbacks of such insurance?
The biggest drawback is that you’ll usually be expected to take out a policy recommended by the solicitor. This naturally limits your ability to shop around and get a cheaper premium.
Another major issue is that most insurers will demand tight controls over your case. This could include deciding which experts are used to assess any medical conditions related to your claim, and even whether or not you accept an offer of settlement from the person or company you bring the case against.
In some cases the premium itself can be unaffordably high. Some insurers or solicitors will fund the premium through a loan meaning there is no up-front payment. However, the client will have to pay interest on this loan and this is usually not recoverable even if the case is won.
What other costs will I pay?
In many cases, somebody using a conditional fee agreement will be asked to pay some specific expenses in the preparation of the case. These could include court fees or fees for medical reports.
In the event of a case taking a particularly long time to come to trial and resolve, you may be required to pay a renewal premium. This is a smaller amount, a proportion of the original premium, paid after each full year.
What if I win the case?
Usually the solicitor will recover their fees from the losing party. They will normally also be able to recover and return the premium paid for the after-the-event insurance.
It is theoretically possible that a court could refuse to force the losing party to pay these costs. This would usually only happen if the case was technically valid but judged to be frivolous. In many cases a solicitor would refuse to handle such a case in the first place.
Posted in Legal Insurance | 
Tags: Compensation Claims, Event Insurance, Legal Aid, Legal Claim, Legal Insurance, Marketing, Medical Conditions, Risk