Fixed Recoverable Costs: When lawyers come 'cap' in hand

Jeremy Hunt, Secretary of State for Health and Social Care, has approved plans to set up a working group that will examine options for a cap on recoverable costs for lawyers in clinical negligence claims worth less than £25,000.

Jeremy Hunt, Secretary of State for Health and Social Care, has approved plans to set up a working group that will examine options for a cap on recoverable costs for lawyers in clinical negligence claims worth less than £25,000.

The working group has been asked to consider the value and operation of the cap and to publish recommendations on the development of a 'bespoke process for clinical negligence claims', which are expected to be revealed in the autumn of this year. The group will include representatives of the legal profession and of the NHS.

In 2016-17, legal costs accounted for 37% of the £1.7 billion the NHS paid out on clinical negligence claims. The Department for Health and Social Care estimates in its consultation response that the proposed cap on costs will save the government £40 million. Jeremy Hunt emphasised the need for a system which is 'not only just for those who have suffered but also just to other patients, both in terms of making sure we learn from mistakes and also pay legal costs in a proportionate and reasonable way.' He called 'excessive' legal fees a 'terrible use of money that could be spent on patient care'.

Last week's announcement responds to a consultation paper published by the Department of Health in January 2017 which invited comments on designing and implementing a scheme of fixed recoverable costs for clinical negligence claims between £1,000 and £25,000. The paper received 167 responses, mainly from law firms, of which 90% represented either claimants or both claimants and defendants. 85% of lawyers and law firms representing the claimant side strongly opposed the suggestion of a cap on recoverable costs. Defendants' solicitors are unlikely to be affected as dramatically by a costs cap because in many cases they are unable to recover costs at all from claimants, even if the claim is defeated, due to 'qualified one-way costs shifting' (QOCS). They might well have supported a cap, however, to promote their clients' interests.

Critics of the proposal for fixed recoverable costs are concerned that it will result in a lower standard of legal representation. Law Society president, Joe Egan, warned: 'Fixing costs could end up limiting the time specialist solicitors can spend understanding the details of an incident in care. Patients must not be denied the legal help they need to get the full compensation they are entitled to in law.' Peter Walsh, chief executive of Action Against Medical Accidents, said that high legal costs could be better avoided by better investigation of incidents in the NHS and early admissions of liability.

Better monitoring of care and investigation of incidents are current topics of reflection in both the NHS and the independent healthcare sector, with a non-statutory inquiry this year looking into lessons that can be learnt from the conviction of consultant breast surgeon, Ian Paterson.

A fixed recoverable costs scheme will benefit healthcare organisations and their insurers in the independent sector as well as in the NHS. We may, however, see some tactical claim demands, and less flexibility on settlements if claimant law firms risk losing costs.