Claims management company
Encyclopedia
In England and Wales
, a claims management company is a business
that offers claims management services to the public. Claims management services consist of advice or services in respect of claims for compensation
, restitution
, repayment or any other remedy for loss or damage, or in respect of some other obligation
. Claims management services cover litigation, or claims under regulation
schemes or voluntary arrangements.
for personal injury
claims, the introduction of conditional fee agreements and the appearance of and growth in claims management companies led to a rapid expansion of litigation from the mid-1990s. This led to public concern at the development of a "compensation culture
". The collapse of claims management company the Accident Group in 2003 increased disquiet with the system. Such companies used aggressive sales
techniques and exaggerated claims, profit
ing from exorbitant commission
s on after the event insurance policies. It was estimated that there were about 1,000 such companies in the UK in 2003. However, there was still evidence that many meritorious claims were discouraged by the difficulties and costs of litigation. These concerns, especially around the operation of conditional fee agreements, led to regulation of the market by Part 2 of the Compensation Act 2006
. The activities regulated are those common to the market and which had caused concern:
— in respect of claims:
, as of 23 April 2007, an individual or a corporation may not, unless exempt or otherwise in receipt of a waiver, provide claims management services by way of business unless authorised by the Claims Management Services Regulator.
It is a crime
for an unauthorised person to provide or offer claims management services, or to pretend to be authorised. Offenders are punishable, on summary conviction, by a fine of up to level 5 on the standard scale
or 51 weeks' imprisonment
. If convicted on indictment
in the Crown Court
, offenders can be sentenced to an unlimited fine or two years' imprisonment. Where a corporate crime
is committed, the offender can only be fined and not imprisoned. The claims regulator also covers the processing and evaluation of complaints against claims management companies.
Solicitor
s, barrister
s, advocate
s and some other lawyer
s are exempt, as are:
Incidental referrals to lawyers are also exempt as are services in respect of counterclaim
s, or claims for contribution
or indemnity
.
The rules and procedure for authorisation are defined in the Compensation (Claims Management Services) Regulations 2006. The Regulator may investigate unauthorised trading and seek an injunction
to prevent it or bring a criminal prosecution. It is a crime to obstruct the Regulator, punishable on summary conviction by a fine of up to level 5 on the standard scale
.
A person may appeal
a decision of the Regulator about authorisation to the Claims Management Services Tribunal and there is a further route of appeal to the Court of Appeal
.
When section 161 of the Legal Services Act 2007
comes into force, claims management services and the Regulator will fall under the supervision of the Office for Legal Complaints and its ombudsman scheme. It has been suggested that the first complaints will not be handled until 2010.
In January 2010 the Tribunal was abolished and its functions transferred to the First-tier Tribunal
.
England and Wales
England and Wales is a jurisdiction within the United Kingdom. It consists of England and Wales, two of the four countries of the United Kingdom...
, a claims management company is a business
Business
A business is an organization engaged in the trade of goods, services, or both to consumers. Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. Businesses may also be not-for-profit...
that offers claims management services to the public. Claims management services consist of advice or services in respect of claims for compensation
Damages
In law, damages is an award, typically of money, to be paid to a person as compensation for loss or injury; grammatically, it is a singular noun, not plural.- Compensatory damages :...
, restitution
Restitution
The law of restitution is the law of gains-based recovery. It is to be contrasted with the law of compensation, which is the law of loss-based recovery. Obligations to make restitution and obligations to pay compensation are each a type of legal response to events in the real world. When a court...
, repayment or any other remedy for loss or damage, or in respect of some other obligation
Law of obligations
The law of obligations is one of the component private law elements of the civil system of law. It includes contract law, delict law, quasi-contract law, and quasi-delict law...
. Claims management services cover litigation, or claims under regulation
Regulation
Regulation is administrative legislation that constitutes or constrains rights and allocates responsibilities. It can be distinguished from primary legislation on the one hand and judge-made law on the other...
schemes or voluntary arrangements.
History
The abolition of legal aidLegal aid
Legal aid is the provision of assistance to people otherwise unable to afford legal representation and access to the court system. Legal aid is regarded as central in providing access to justice by ensuring equality before the law, the right to counsel and the right to a fair trial.A number of...
for personal injury
Personal injury
Personal injury is a legal term for an injury to the body, mind or emotions, as opposed to an injury to property. The term is most commonly used to refer to a type of tort lawsuit alleging that the plaintiff's injury has been caused by the negligence of another, but also arises in defamation...
claims, the introduction of conditional fee agreements and the appearance of and growth in claims management companies led to a rapid expansion of litigation from the mid-1990s. This led to public concern at the development of a "compensation culture
Compensation culture
"Compensation culture" describes a society in which it is acceptable for anyone who has suffered a personal injury to seek compensatory damages through litigation from someone connected with the injury...
". The collapse of claims management company the Accident Group in 2003 increased disquiet with the system. Such companies used aggressive sales
Sales
A sale is the act of selling a product or service in return for money or other compensation. It is an act of completion of a commercial activity....
techniques and exaggerated claims, profit
Profit (economics)
In economics, the term profit has two related but distinct meanings. Normal profit represents the total opportunity costs of a venture to an entrepreneur or investor, whilst economic profit In economics, the term profit has two related but distinct meanings. Normal profit represents the total...
ing from exorbitant commission
Commission (remuneration)
The payment of commission as remuneration for services rendered or products sold is a common way to reward sales people. Payments often will be calculated on the basis of a percentage of the goods sold...
s on after the event insurance policies. It was estimated that there were about 1,000 such companies in the UK in 2003. However, there was still evidence that many meritorious claims were discouraged by the difficulties and costs of litigation. These concerns, especially around the operation of conditional fee agreements, led to regulation of the market by Part 2 of the Compensation Act 2006
Compensation Act 2006
The Compensation Act 2006 is an Act of the Parliament of the United Kingdom, introduced in response to concerns about a growing compensation culture but conversely to ensure that the public received dependable service from claims management companies...
. The activities regulated are those common to the market and which had caused concern:
- AdvertisingAdvertisingAdvertising is a form of communication used to persuade an audience to take some action with respect to products, ideas, or services. Most commonly, the desired result is to drive consumer behavior with respect to a commercial offering, although political and ideological advertising is also common...
for cases; - Advising a claimant in respect of claims;
- Certain large-scale referral activities;
- Investigating the circumstances, merits or foundation of a claim, with a view to litigation;
- Representing a claimant to any body, in writing or orally;
— in respect of claims:
- For personal injuriesPersonal injuryPersonal injury is a legal term for an injury to the body, mind or emotions, as opposed to an injury to property. The term is most commonly used to refer to a type of tort lawsuit alleging that the plaintiff's injury has been caused by the negligence of another, but also arises in defamation...
; - Under the Criminal Injuries Compensation Scheme;
- For certain benefitEmployee benefitEmployee benefits and benefits in kind are various non-wage compensations provided to employees in addition to their normal wages or salaries...
s arising from industrial injuries; - In relation to employment law;
- For housing disrepair;
- In relation to financial products or servicesFinancial servicesFinancial services refer to services provided by the finance industry. The finance industry encompasses a broad range of organizations that deal with the management of money. Among these organizations are credit unions, banks, credit card companies, insurance companies, consumer finance companies,...
.
Regulation
In England and WalesEngland and Wales
England and Wales is a jurisdiction within the United Kingdom. It consists of England and Wales, two of the four countries of the United Kingdom...
, as of 23 April 2007, an individual or a corporation may not, unless exempt or otherwise in receipt of a waiver, provide claims management services by way of business unless authorised by the Claims Management Services Regulator.
It is a crime
Crime
Crime is the breach of rules or laws for which some governing authority can ultimately prescribe a conviction...
for an unauthorised person to provide or offer claims management services, or to pretend to be authorised. Offenders are punishable, on summary conviction, by a fine of up to level 5 on the standard scale
Standard scale
The standard scale is a system whereby financial criminal penalties in legislation have maximum levels set against a standard scale. Then, when inflation makes it necessary to increase the levels of the fines the legislators need to modify only the scale rather than each individual piece of...
or 51 weeks' imprisonment
Imprisonment
Imprisonment is a legal term.The book Termes de la Ley contains the following definition:This passage was approved by Atkin and Duke LJJ in Meering v Grahame White Aviation Co....
. If convicted on indictment
Indictment
An indictment , in the common-law legal system, is a formal accusation that a person has committed a crime. In jurisdictions that maintain the concept of felonies, the serious criminal offence is a felony; jurisdictions that lack the concept of felonies often use that of an indictable offence—an...
in the Crown Court
Crown Court
The Crown Court of England and Wales is, together with the High Court of Justice and the Court of Appeal, one of the constituent parts of the Senior Courts of England and Wales...
, offenders can be sentenced to an unlimited fine or two years' imprisonment. Where a corporate crime
Corporate crime
In criminology, corporate crime refers to crimes committed either by a corporation , or by individuals acting on behalf of a corporation or other business entity...
is committed, the offender can only be fined and not imprisoned. The claims regulator also covers the processing and evaluation of complaints against claims management companies.
Solicitor
Solicitor
Solicitors are lawyers who traditionally deal with any legal matter including conducting proceedings in courts. In the United Kingdom, a few Australian states and the Republic of Ireland, the legal profession is split between solicitors and barristers , and a lawyer will usually only hold one title...
s, barrister
Barrister
A barrister is a member of one of the two classes of lawyer found in many common law jurisdictions with split legal professions. Barristers specialise in courtroom advocacy, drafting legal pleadings and giving expert legal opinions...
s, advocate
Advocate
An advocate is a term for a professional lawyer used in several different legal systems. These include Scotland, South Africa, India, Scandinavian jurisdictions, Israel, and the British Crown dependencies of Jersey, Guernsey and the Isle of Man...
s and some other lawyer
Lawyer
A lawyer, according to Black's Law Dictionary, is "a person learned in the law; as an attorney, counsel or solicitor; a person who is practicing law." Law is the system of rules of conduct established by the sovereign government of a society to correct wrongs, maintain the stability of political...
s are exempt, as are:
- Persons regulated by the Financial Services and Markets Act 2000Financial Services and Markets Act 2000The Financial Services and Markets Act 2000 is an Act of the Parliament of the United Kingdom that created the Financial Services Authority as a regulator for insurance, investment business and banking.-Outline:...
; - CharitiesCharitable organizationA charitable organization is a type of non-profit organization . It differs from other types of NPOs in that it centers on philanthropic goals A charitable organization is a type of non-profit organization (NPO). It differs from other types of NPOs in that it centers on philanthropic goals A...
and not for profit bodies; - Motor Insurers' Bureau;
- Medical Protection SocietyMedical Protection SocietyThe Medical Protection Society is a not for profit organisation which offers legal and ethical help to medical and dental professionals...
, Medical Defence UnionMedical Defence UnionThe Medical Defence Union is the largest medical defence union in the United Kingdom, and is one of three major medical defence organisations in the country.The MDU was established in 1885 and was the first of its kind in the world...
, and Medical and Dental Defence Union of ScotlandMedical and Dental Defence Union of ScotlandThe Medical and Dental Defence Union of Scotland is one of three major medical defence organisations in the UK and offers professional indemnity and expert medico-legal and dento-legal advice for doctors, dentists and other healthcare professionals throughout the United Kingdom. MDDUS is a mutual...
; and - Trade UnionTrade unionA trade union, trades union or labor union is an organization of workers that have banded together to achieve common goals such as better working conditions. The trade union, through its leadership, bargains with the employer on behalf of union members and negotiates labour contracts with...
s.
Incidental referrals to lawyers are also exempt as are services in respect of counterclaim
Counterclaim
In civil procedure, a party's claim is a counterclaim if the defending party has previously made a claim against the claiming party.Examples of counterclaims include:...
s, or claims for contribution
Joint and several liability
Where two or more persons are liable in respect of the same liability, in most common law legal systems they may either be:* jointly liable, or* severally liable, or* jointly and severally liable.-Joint liability:...
or indemnity
Indemnity
An indemnity is a sum paid by A to B by way of compensation for a particular loss suffered by B. The indemnitor may or may not be responsible for the loss suffered by the indemnitee...
.
Claims Management Services Regulator
The Claims Management Services Regulator was created by section 11 of the Compensation Act 2006. The post of Regulator if occupied by the Secretary of State for Justice to authorise and regulate claims management companies and:- Set and monitor standards of competence and professional conductLegal ethicsLegal ethics encompasses an ethical code governing the conduct of persons engaged in the practice of law and persons more generally in the legal sector.-In the United States:...
; - Promote good practice, in particular as to the provision of information about charges and other matters to users;
- Promote practices likely to facilitate competitionCompetition (economics)Competition in economics is a term that encompasses the notion of individuals and firms striving for a greater share of a market to sell or buy goods and services...
; - Ensure that arrangements are made for the protection of users, including complaints handling.
The rules and procedure for authorisation are defined in the Compensation (Claims Management Services) Regulations 2006. The Regulator may investigate unauthorised trading and seek an injunction
Injunction
An injunction is an equitable remedy in the form of a court order that requires a party to do or refrain from doing certain acts. A party that fails to comply with an injunction faces criminal or civil penalties and may have to pay damages or accept sanctions...
to prevent it or bring a criminal prosecution. It is a crime to obstruct the Regulator, punishable on summary conviction by a fine of up to level 5 on the standard scale
Standard scale
The standard scale is a system whereby financial criminal penalties in legislation have maximum levels set against a standard scale. Then, when inflation makes it necessary to increase the levels of the fines the legislators need to modify only the scale rather than each individual piece of...
.
A person may appeal
Appeal
An appeal is a petition for review of a case that has been decided by a court of law. The petition is made to a higher court for the purpose of overturning the lower court's decision....
a decision of the Regulator about authorisation to the Claims Management Services Tribunal and there is a further route of appeal to the Court of Appeal
Court of Appeal of England and Wales
The Court of Appeal of England and Wales is the second most senior court in the English legal system, with only the Supreme Court of the United Kingdom above it...
.
When section 161 of the Legal Services Act 2007
Legal Services Act 2007
The Legal Services Act 2007 is an Act of the Parliament of the United Kingdom that seeks to liberalise and regulate the market for legal services in England and Wales, to encourage more competition and to provide a new route for consumer complaints...
comes into force, claims management services and the Regulator will fall under the supervision of the Office for Legal Complaints and its ombudsman scheme. It has been suggested that the first complaints will not be handled until 2010.
Claims Management Services Tribunal
The Claims Management Services Tribunal was created by section 12 of the Compensation Act 2006 to hear:- appeals from persons against a decision of the Regulator about authorisation; and
- after section 13(2) of the 2006 Act comes into force, references from the Claims Management Services Regulator in respect of complaints or questions about the professional conduct of a claims management company.
In January 2010 the Tribunal was abolished and its functions transferred to the First-tier Tribunal
First-tier Tribunal
The First-tier Tribunal is part of the administrative justice system of the United Kingdom. It was created in 2008 as part of a programme, set out in the Tribunals, Courts and Enforcement Act 2007, to rationalise the tribunal system, and has since taken on the functions of twenty previously...
.