£70m legal challenge over Accident Group

17/12/2004

Collapsed personal injury firm The Accident Group is at the centre of a £70m legal battle over compensation claims the company’s insurers say should never have been made.

A Swiss insurance giant has warned up to 700 solicitors across Britain that they could be sued for money paid out over cases that failed under the “no win, no fee” system before the Merseyside-based company went into liquidation. Winterthur Swiss Insurance is the parent company of one of the insurance firms which under-wrote The Accident Group’s (TAG) cases. It claims the law firms were negligent in checking whether personal injury claims were genuine.

International commercial lawyers at Barlow Lyde and Gilbert (BLG), representing Winterthur, say they estimate that 54% of claims made through TAG should have been rejected at the vetting stage because they were either bogus or unwinnable.

The insurance company underwrote claims made through TAG, earning a fee of around £300 for every one that succeeded, but having to cover the costs of every case that failed. That included an administration fee of around £650 to TAG, together with tax and solicitors’ expenses.

The average total claimed loss to the insurer is £1,702 per case.

The case will attempt to prove negligence by TAG, which “farmed” claims from the public on street corners and doorsteps, the company’s main vetting solicitors, Manchester-based Rowe Cohen, and nine of around 700 TAG “panel” solicitors firms,, who showed particularly high failure rates in claims.

Lawyers for Winterthur will argue all 11 parties had an obligation to vet and monitor claims at all stages, to minimise the failure rate.

If successful, the case could have huge repercussions for the legal and insurance industries, and could even force some of TAG’s original 700 panel solicitors out of business.

Last night, a spokesman for BLG confirmed warning letters and draft particulars of the case had been served on TAG, Rowe Cohen and most of the 700 former panel solicitors, including the nine involved in the test case, in the last week.

There will now be a three-month period to allow the potential defendants to come up with an out-of-court settlement before BLG instigates proceedings.

However, insiders say the case will probably go to court.

Solicitors are expected to claim they cannot be proved to be negligent, as files had already been vetted by TAG and Rowe Cohen, and appeared genuine when they arrived with individual firms.

Winterthur took on a £36m debt that it now estimates will rise to £70m, after its subsidiary company, the National Insurance Guarantee Corporation, was sold to the Royal Bank of Scotland following TAG’s collapse.

The company was one of several insurance underwriters of TAG’s operation.

It is understood that similar actions against TAG may be being planned by other insurers.

Last night, Paul Stanley, the managing partner of Manchester firm Begbies Traynor, who are acting as joint liquidators with Price Waterhouse Coopers on the TAG case, indicated that the brunt of the cost might have to be borne by individual solicitors’ firms.

He said: “So far, we have recovered in the region of £11m from TAG. Investigations are ongoing which may recover more, but all that is likely to be passed on to the preferential creditors, who are the VAT, the PAYE and the employees. “There is no way there will be funds to pay off anything like a £70m debt.”

“In total, TAG owes the Inland Revenue around £13m, and employees are suing for an estimated £6m.” A second strand of the Wintarthur claim, on behalf of a sample of 1,080 clients of the nine firms in question, could see clients recoup around £320 each for illegal referral fees taken by solicitors to pay TAG’s vetting team.

Simon Cohen, senior partner at Rowe Cohen, said: “The matter has now been referred to our insurers, but we intend to vigorously defend our position against this claim.” Paul Rimmer, spokesman for Winterthur, said: “I can confirm we have sent out a number of letters to a number of solicitors informing them that we reserve the right to bring actions against them in respect of insurance premiums underwritten in connection with The Accident Group.”

The Daily Telegraph