Law: Do-it-yourself legal action

People have it for the home and for the car - so why not for legal actions? The Government believes legal insurance is the way forward to replace legal aid. Michael Streeter looks into the privatisation of litigation.

You are injured in an accident that is clearly somebody else's fault, what do you do? Traditionally, the answer is to consult a solicitor and let the law take its course, but in the future the first stop could be an insurance company.

Under plans by some of the more forward-thing insurance companies, a potential litigant would click into the Internet and find an insurance company that would guide them through the likely costs and chances of success of such an action. The firm would tell them the insurance premium (to pay the other side's costs if they lose) and then recommend a lawyer to bring the action.

This new world of litigation will be ushered in, probably in the summer, with the Government's plans to remove legal aid for civil cases involving money claims or damages and move to a conditional no win, no fee arrangement.

Ministers have earmarked legal insurance - both before and after the event - as the way forward to compensate for the loss of legal aid to fund such cases.

In a recent speech, Geoff Hoon, Parliamentary Secretary at the Lord Chancellor's Department, said it was important that people were encouraged to "look after themselves" in the law.

Addressing lawyers in London, Mr Hoon said: "We know that people should insure their houses and cars. But why not when it comes to legal expenses?

He continued: "For a mere pounds 10 to pounds 20 a year, coverage for all sorts of the most common types of dispute can be purchased."

The insurance industry, after recent talks with the Lord Chancellor Lord Irvine, is bullish that so-called before-the-event or legal expenses insurance can fund a great deal of civil litigation. It claims that up to 18 million people already have some form of this insurance, though many of these policies are linked to car insurance. Many people already have legal expenses insurances as an "add-on" to their household cover, which for as little as pounds 16 a year can cover claims against problems at work and consumer wrangles for up to pounds 50,000 a year.

One insurance source said: "We believe that premiums at those levels can cover up to 95 per cent of the population. We see this as a growth area."

However, critics fear that while such insurance may have a role, it will inevitably help those who can afford or are inclined to take out such cover and not the less-well-off. These policies will also exclude important areas such as medical negligence claims.

Roger Smith, director of the Legal Action Group, believes before-the- event insurance will be "peripheral" to the funding of most cases.

Another key area, essential for conditional fees, is so-called after- the-event insurance, where people who already have claims take out insurance to pay the other side's costs in case they lose the action. It is in these cases that the possibility of approaching an insurance company first, which assesses the risk, sets the premium and then finds the solicitor, will occur. One firm, Litigation Protection, is proposing such a scheme called Access to Justice 2000.

The premiums do not always come cheap. For personal injury cases it can vary from around pounds 95 to pounds 160, while in the more complex medical negligence cases it can be as much as pounds 6,000. Critics claims the working-out of figures - setting cost against risk - needs far more time than the Government is allowing.

But the key question is who pays these premiums - even a few hundred pounds will be too much for some people. A variety of different options, including funds provided by successful cases, have been mooted, though as yet the Government has not committed itself. It may be that ministers will simply leave it to solicitors to pay the premiums as part of the "commercial risk" of litigation.

The insurance industry is confident it can deliver the new packages required by the Government, though some would prefer a year's delay and then launch the reforms in one "Big Bang" in April 1999.

Charles Wright, assistant general manager of DAS Legal Expenses, said his main concern was whether the legal profession would be ready to cope with the change to risk assessment of cases. "I think the legal profession may need a little longer to get ready."