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SRA issues warning on potentially fraudulent personal injury claims

The SRA recently issued a warning notice in respect of potentially fraudulent personal injury claims: Thursday, March 24, 2016

60 Seconds with Martina Hogg, Lead Compliance Consultant

The SRA recently issued a warning notice in respect of potentially fraudulent personal injury claims. Is this a sign that there is a problem in that sector of the legal market?

Think Ronseal – a warning notice does exactly what it says on the tin. It is a warning, it is not a new set of rules, but the SRA might refer to it in any investigation if they consider a solicitor has failed to take notice of the warning. Whilst there is a lot of commentary in the public domain about the personal injury market, I note that the personal injury sector is not singled out in the SRA Priority Risks 2015/2016

So what are we being warned about?

 In the press release dated 21 March 2016 the SRA has raised concerns about five specific issues:

  1. cold calling;
  2. breaching the ban on referral fees;
  3. acting on instructions without client approval;
  4. paying damages to third parties; and
  5. bringing claims without clients’ knowledge.

That sounds pretty serious. What on earth is going on?

Well, on first reading it does not sound good but if you consider each issue carefully you do find yourself asking why the SRA has gone to all the trouble of stating the obvious.

What do you mean?

Well let us go through each issue identified in the warning notice:

Cold calling

Cold calling for any work, not just personal injury work, has been prohibited for a very long time, in particular, before the 2011 Code of Conduct and long before LASPO. In addition, Claims Management Companies are prohibited from cold calling in respect of personal injury work.

Breaching the ban on referral fees

Chapters 6 and 9of the SRA Code of Conduct 2011 were amended following the introduction of LASPO and the SRA have been responsible for enforcing that ban for just about three years now.

Acting on instructions without client approval

If solicitors are acting without client approval then this is indeed a serious issue but, surely, this is an issue that applies across the entire spectrum of legal work and not just personal injury work. Where is the evidence that this is more or less of a problem in personal injury work than in say commercial property or employment law

Paying damages to a third party

This may or may not be appropriate in certain cases and of course any solicitor should normally assume that damages ought to be paid to the client direct. In any exceptional cases the solicitor would need to make appropriate enquiries and obtain the relevant instructions. Again, I am a little concerned about why the SRA would think this is a problem in personal injury cases rather than any other type of work.

Bringing claims without the client’s knowledge-this really is alarming and if it is going on then it needs to be stamped out immediately. Yet again, I find myself asking where the evidence is.

So we should just ignore the warning notice?

No, most definitely not! The SRA have raised these issues so solicitors need to be mindful of the issues when conducting personal injury work.

I do think though that the SRA could have been a bit more constructive with their guidance. For example, extracting evidence from its own investigations to identify what problems might exist and then issuing guidance based upon the evidence it has collected itself might have been a more useful exercise than just reacting to a report by the Insurance Fraud Task Force.

What is clear is that PI firms need to audit their files and monitor their work sources with this warning notice very firmly at the forefront of their minds.