Divorce and the proposed Legal Aid cuts

The UK Government, as part of its ongoing cost-cutting measures, is recommending some significant changes to the legal aid system, including a £350m reduction in funding. In November 2010 Justice Secretary Kenneth Clarke presented a proposal in which legal aid (with some exceptions) will be cut for cases such as divorce, welfare benefits, clinical negligence and personal injury.

Speaking to the BBC about these proposals Clarke described how they planned to “introduce a more targeted civil and family scheme which will discourage people from resorting to lawyers whenever they face a problem, and instead encourage them to consider more suitable methods of dispute resolution." (i)

However, others have concerns that the changes and cuts to legal aid may reduce access to justice and affect those who can least afford it.

In the case of divorce, couples may be required to go through mediation, represent themselves or find the money to fund their own divorce under the new proposals. This will obviously cause additional stress in an already upsetting situation.

One solution, should the proposals go through, would be to introduce insurance that covers the cost of divorce. In an interview on the BBC Radio 4 show Moneybox, Tony Buss, ARAG’s Managing Director describes how in Germany divorce insurance is well-established and taken out by people alongside their other legal protection insurances. A married couple will pay a premium of approximately €100 a year which if they decide to divorce (after at least 3 years of marriage) will pay out around €30,000 towards the legal costs involved. (ii)

Another avenue to consider is that of pre- and post-nuptial agreements. These are not yet enforceable by law but with the recent publication of the Law Commission’s consultation on marital property agreements (iii) this may change in the future. Therefore it would surely make sense to introduce an accompanying insurance that would cover the cost of litigation for both spouses in the event of divorce.

So is there a place for this type of cover in the UK? As Buss points out, so far insurance companies have “shied away from providing it because it is not yet socially acceptable.” But with the potential removal of legal aid, prospect of either funding or fighting your own divorce and the possibility of legally-binding pre-nuptial agreements, this cover would certainly provide a good alternative.

You can ‘listen again’ to discussions on this topic and interviews with Tony Buss on Moneybox, Radio 5 Lives’ Breakfast Show (2 hrs 50 mins) and Ted Robbin’s show on BBC Radio Lancashire (52 mins 33 secs).

(i) 15/11/2010 BBC, Legal aid reforms are unveiled by Kenneth Clarke: http://www.bbc.co.uk/news/uk-11741289
(ii) 15/01/2010 BBC Radio 4, Moneybox: http://www.bbc.co.uk/iplayer/console/b00xgr11/Money_Box_15_01_2011
(iii) Law Commission, Marital Property Agreements: A Consultation Paper (2011) http://www.lawcom.gov.uk/marital_property.htm

Employment Tribunal System

Following a research paper on Business and the Employment Tribunal System (i) the British Chamber of Commerce issued a press release calling for reforms to the employment tribunal system. According to the press release “the average cost for an employer to defend themselves at tribunal is £8,500”, as compared to an average payout of £5,400 if the employer settles. The problem that this highlights is that employers will be persuaded to settle “even if faced with a spurious claim” because it keeps costs down and is “more convenient to do so”.(ii)

As Dr Adam Marshall, Director of Policy and External Affairs at the BCC, points out in the press release:

“The employment tribunal system is in dire need of reform. Currently, tribunals are too slow and overwhelmingly weighted in favour of the employee - whereas they should be fair for employers and employees alike.”

ARAG’s range of commercial legal expenses insurances provides vital protection which will help to level the playing field so that the employer feels confident fighting unfounded claims at employment tribunals. For instance, Absolute Business Legal responds to a generous range of legal disputes that can arise from your day-to-day business activities, including:

• employment disputes and compensation awards


• defence of prosecutions


• representation for compliance and regulatory matters


• pursuing claims for property damage nuisance and trespass


• license appeals


• representation for full and aspect tax enquiries


• VAT appeals

Find out more about Absolute and ARAG’s other commercial legal insurance products on the ARAG website.

(i) British Chamber of Commerce (2011) Business and the Employment Tribunal System, Abigail Morris
(ii) British Chamber of Commerce (05/01/2011) Press release: BCC calls for reform to employment tribunal system

Personal Injury Advertising

Lord Young’s recent report Common Sense, Common Safety explored the perceived ‘compensation culture’ in Britain, which encourages a ‘if there’s a blame, there’s a claim’ mentality in which people are led to believe that they can get financial compensation for even the most minor accident. The report suggests that this places unnecessary burdens on businesses and the voluntary sector, making them take ‘an overzealous approach to applying the health and safety regulations’.

The report identifies the advertising conducted by the claims management companies as one of the major contributing factors to this problem. These advertising campaigns often promote the reward of non-refundable inducements, for example:

“We'll pay you £200 immediately after our solicitors approve your claim”
“As soon as we accept your claim, we promise to give you a £150 cash advance”

Under the current regulations of Client Specific Rule 6(b) of the Conduct of Authorised Persons Rules 2007 these inducements are allowed as they are not offered as an ‘immediate cash payment'. Following recommendations in Lord Young’s report, the Ministry of Justice (MoJ) is proposing to change this rule so that inducements of any kind are banned from all stages of the process. The MoJ has issued the Claims Management Regulation Consultation Paper outlining its plans to all claims management companies with all responses due by 10 February 2011.

So do the problems in the current system as laid out in the Common Sense, Common Safety report exist? As with anything they will to an extent but as the Consultation Paper points out “the majority of claims management businesses are not likely to be particularly affected.” Therefore is it right to limit the competitive edge that advertising and incentive strategies bring to the industry? In addition, as the money for inducements is not added to the claims cost but instead paid by the solicitors is there really that much of a problem to be solved?

You can read more in Lord Young’s Report and the MoJ’s Consultation Paper. To find out about legal insurance, visit ARAG’s website.

Shadow Justice Secretary asks probing questions of civil litigation costs

Questions, questions and more questions, in fact 48 (all listed below) were tabled by the Shadow Justice Secretary, Andy Slaughter, in the House of Commons on Wednesday 1st December 2010 on proposed changes to civil litigation funding and costs.

A response is expected on the 3rd December 2010, so watch this space for an update.

• Mr Andy Slaughter: How many cases brought against the National Health Service Litigation Authority were funded by (a) legal aid, (b) a conditional fee agreement and (c) by other forms of funding in each of the last three years; and how many in each category resulted in a compensation payment.


• Mr Andy Slaughter: What estimate he has made of the (a) total and (b) average annual amount that claimants who do not have to contribute towards the costs of their claims would have to contribute following implementation of the proposals in the Civil Litigation Funding Green Paper.


• Mr Andy Slaughter: What estimate he has made of the annual number of claimants who do not have to contribute towards the costs of their claims and would have to do so as the consequence of implementation of the proposals in the Civil Litigation Funding Green Paper; and what estimate he has made of the number of such claimants who would consequently be deterred from bringing claims.


• Mr Andy Slaughter: What maximum guideline hourly rate he proposes following implementation of the proposals in the Civil Litigation Funding Green Paper.


• Mr Andy Slaughter: When he plans to publish the outcome of his consultations on (a) the Legal Aid Green Paper and (b) the Civil Litigation Funding Green Paper.


• Mr Andy Slaughter: What estimate he has made of the annual number and proportion of viable personal injury claims that are not pursued.


• Mr Andy Slaughter: What proportion of personal injury claims are low-value road traffic cases qualifying for the new portal system.


• Mr Andy Slaughter: How many cases have not been proceeded with under the low-value road traffic cases portal system owing to the failure of a defendant to comply with its terms.


• Mr Andy Slaughter: What assessment he has made of the effectiveness of the low-value road traffic cases portal system.


• Mr Andy Slaughter: What steps he plans to take to introduce fast-track fixed costs.


• Mr Andy Slaughter: How many personal injury cases were settled (a) after proceedings were commenced and (b) after a defence was served denying liability in each of the last three years.


• Mr Andy Slaughter: In how many personal injury cases did claimant (a) beat and (b) failed to beat a Part 36 offer in each of the last three years.


• Mr Andy Slaughter: In how many personal injury cases the case proceeded to a trial in which the claimant was (a) successful and (b) unsuccessful in each of the last three years.


• Mr Andy Slaughter: What change he expects to (a) litigation costs to and (b) damages payable by Government departments and agencies to personal injury claimants as a consequence of implementation of the proposals in the Legal Aid Green Paper and the Civil Litigation Funding Green Paper.


• Mr Andy Slaughter: How many personal injury claims were brought against his Department and its agencies in each of the last three years.


• Mr Andy Slaughter: How much has been recovered through benefit recoupment from personal injury claims (a) in total and (b) in respect of (i) road traffic accident, (ii) employers (A) disease and (B) other liability cases, (iii) occupiers' liability, (iv) other public liability and (v) clinical negligence cases in each of the last three years.


• Mr Andy Slaughter: What estimate he has made of the change in the level of Exchequer revenue from VAT receipts consequent on the implementation of the proposals in the (a) Legal Aid and (b) Civil Litigation Funding Green Papers.


• Mr Andy Slaughter: What estimate he has made of the annual number of clinical negligence cases dealt with under (a) fast-track and (b) multi-track procedures which qualified for funding through legal aid under existing criteria in the last 12 months which would not so qualify under the proposals in the Legal Aid Green paper.


• Mr Andy Slaughter: If he will estimate the annual number of occupier and public liability accident cases under (a) fast track and (b) multi-track arrangements which qualify for (i) conditional fee agreements and (ii) after-the-event insurance support through legal aid that would not be brought as a result of his proposals in the Civil Litigation Funding Green Paper.


• Mr Andy Slaughter: If he will estimate the annual number of road traffic accident cases under (a) fast track and (b) multi-track arrangements which qualify for (i) conditional fee agreements and (ii) after-the-event insurance support through legal aid that would not be brought as a result of his proposals in the Civil Litigation Funding Green Paper.


• Mr Andy Slaughter: What estimate he has made of the number of cases of injuries of maximum severity pursued under multi-track arrangements supported by after-the-event insurance that will not be brought after implementation of the proposals in the Civil Litigation Funding Green Paper.


• Mr Andy Slaughter: If he will estimate the annual number of clinical negligence cases under (a) fast-track and (b) multi-track arrangements which qualify for (i) conditional fee agreement funding through legal aid and (ii) after-the-event insurance support that would not be brought as a result of his proposals in the Civil Litigation Funding Green Paper.


• Mr Andy Slaughter: What assessment he has made of the requirement for primary legislation to implement each proposal in the Civil Litigation Funding Green Paper.


• Mr Andy Slaughter: What assessment he has made of the likely effect on provision of legal advice for (a) clinical negligence, (b) personal injury cases and (c) small business disputes of the proposals in (i) the Legal Aid Green Paper and (ii) the Civil Litigation Funding Green Paper.


• Mr Andy Slaughter: With reference to the impact assessment on the proposals in the Civil Litigation Funding Green Paper, what estimate he has made of the likely monetary benefit to the liability insurance industry arising from reduced (a) costs and (b) damages payments attributable to implementation of the Green Paper proposals.


• Mr Andy Slaughter: With reference to the impact assessment for the Civil Litigation Funding Green Paper, what estimate he has made of the average change in (a) damages awarded to claimants and (b) costs claimed by lawyers of claimants.


• Mr Andy Slaughter: What assessment he has made of the likely (a) extent, (b) availability and (c) cost of the (i) stand-alone and (ii) general before-the-event insurance proposed in his Civil Litigation Funding Green Paper to families of (A) average income and (B) below-average income.


• Mr Andy Slaughter: What assessment he has made of the likely restrictions on liability to a policy holder (a) generally and (b) for legal costs in the before-the-event insurance policies proposed as alternative sources of legal funding in the Civil Litigation Funding Green Paper.


• Mr Andy Slaughter: What level of means he proposes as that which will entitle (a) a claimant to benefit from and (b) a defendant to avoid the qualified one way costs shifting proposed in the Civil Litigation Funding Green Paper. [28978] (For answer 03/12/2010)


• Mr Andy Slaughter: What progress he has made in developing his proposed pilot for predictable personal injury damages in claims up to £10,000.


• Mr Andy Slaughter: What assessment he has made of the consequences for (a) the viability of after-the-event insurance and (b) the effect on civil litigation of a reduction in the use of after-the-event insurance of implementation of the proposals for qualified one way costs shifting in the Civil Litigation Funding Green Paper.


• Mr Andy Slaughter: What assessment he has made of the likely effect on levels of premiums for after-the-event insurance if recoverability is limited to liability disputed cases in the post protocol period under the proposals in the Civil Litigation Funding Green Paper.


• Mr Andy Slaughter: How much he expects to recover annually from interest on solicitors' client accounts in (a) cash terms and (b) as a proportion of the legal aid budget as the consequence of implementation of the proposals in the Civil Litigation Funding Green Paper.


• Mr Andy Slaughter: How many (a) fast-track and (b) multi-track cases of clinical negligence funded through legal aid have been brought in each of the last three years.


• Mr Andy Slaughter: What recent representations he has received from the Law Commission on the level of general damages in personal injury claims; and what recent assessment he has made of the adequacy of that level.


• Mr Andy Slaughter: What estimate he has made of the likely cost per case to a claimant of obtaining independent legal advice on a damages-based agreement under his proposals in the Civil Litigation Funding Green Paper.


• Mr Andy Slaughter: What estimate he has made of the likely cost to the public purse of operating a regulatory system for the damages-based agreements proposed in his Civil Litigation Funding Green Paper.


• Mr Andy Slaughter: What discussions he has had with the judiciary on potential changes to the number of litigants-in-person arising from the implementation of the proposals in the Civil Litigation Funding Green Paper.


• Mr Andy Slaughter: What estimate he has made of the likely average reduction in court costs attributable to the proportionality test proposed in the Civil Litigation Funding Green Paper.


• Mr Andy Slaughter: What estimate he has made of the likely monetary value of the uplift of 10 per cent. on general damages as proposed in his Department's Civil Litigation Funding Green Paper in respect of an average (a) employers' liability and (b) road traffic fast-track personal injury claim.


• Mr Andy Slaughter: Whether he has had discussions with after-the-event insurers on the financial liability of the proposal in the Civil Litigation Funding Green Paper for recovery of after-the-event premiums for disbursements.


• Mr Andy Slaughter: At what rate he proposes to fix success fees for each type of case.


• Mr Andy Slaughter: Whether he has made an estimate of the likely effect on the number of law firms which handle personal injury claims of the implementation of the proposals in the Civil Litigation Funding Green Paper.


• Mr Andy Slaughter: Whether he has made an assessment of the likely effects on the legal services provided by (a) trades unions and (b) membership organisations of the implementation of his proposal to end collective conditional fee agreements.


• Mr Andy Slaughter: What assessment he has made of the merits of increasing the level of use of mediation at an early stage in personal injury claims.


• Mr Andy Slaughter: If he will assess the merits of reversing the burden of proof in personal injury cases (a) generally and (b) in respect of each type of case for the purpose of (i) reducing litigation costs and (ii) speeding up claims.


• Mr Andy Slaughter: How many and what proportion of the cases which resulted in recoupment of benefits were (a) funded under conditional fee agreements and (b) underwritten by after the event insurance.


• Mr Andy Slaughter: What estimate he has made of the change in revenue accruing to the Department for Work and Pensions from benefit recoupment consequent on the implementation of the proposals in the (a) Legal Aid and (b) Civil Litigation Funding Green Papers.

Home Emergency Insurance - are your clients covered?

A sales person should believe in their product. I believe in Home Emergency Insurance and think that every home should have a policy.

With forecasts over the coming weeks of a cold snap bringing snow and ice to the UK the likelihood of your customers needing Home Emergency Insurance is significantly increased.

Imagine a typical scenario for your customer - the heating breaks down on Christmas Eve and they have little chance of getting anyone out to fix it. ARAG’s Home Emergency tackles this common problem by providing cover 24 hours a day, 365 days a year, meaning that we will have someone there to fix it, usually within a couple of hours.

But it’s not just boiler cover. It is plumbing and drainage problems, failure of power, broken toilet, vermin infestation and security problems.

Many people don’t know about Home Emergency Insurance or think that the home insurance covers it. Unfortunately, it doesn’t and this product has been designed to plug that gap and sit alongside the main policy.

ARAG provides a high-quality home emergency product that offers better cover than most of the market. It is also very competitively priced beating the likes of British Gas and Direct Line.

Service is important in this area. An emergency is a stressful situation and people get upset if things aren’t sorted fast. That is why we have chosen our partners very carefully and constantly monitor performance to maintain great standards.

So as the winter sets in and we enter the busy six months for emergency calls, now is the best time to advise your customers to take out Home Emergency Insurance to give them additional peace of mind.

If you would like to find out more about ARAG’s Home Emergency Insurance contact the sales team either by email or call on 0117 917 1685.

John Gray – Corporate Development Executive - ARAG