Conflict of interest could happen more regularly from next year when changes to personal injury law take effect and this could mean that lawyers find they are more exposed to claims of negligence and a rise in premiums for professional indemnity insurance.
It is reported that many insurers already have a tendency to attempt to target both sides of the insurance market and with the new rules coming into effect and the accompanying new business structures this tendency will be much more likely to develop further.
There has been considerable doubts about the use of tools such as professional indemnity insurance damage matrices and QAT’s. It is felt that these tools could possibly lead to an underestimation of the value of a PI insurance claim. It is reported that there is a tendency for many insurers to take the bottom rung of the claim scale and then deduct another ten percent of that for good measure.
Up to now, legal companies that are engaged to act for both sides of a PI insurance claim will generally direct one or another of the parties to another advisor when there is a potential direct conflict of interest involved.
If claimants end up settling for an award that is less than the value as a result of a conflict of interest, then it remains a possibility that their legal advisors are exposed to a claim of professional negligence.
From next year, the rules will change to allow both insurers and banks to establish and own companies which have been set up as alternative business entities. However, the use of matrices or QAT’s is not likely to change and the choice will remain the companies’ own prerogative it has been reported.
Spokesmen for the industry say that generally PI insurance companies want to use the same approach to deciding claim values as their legal firms and this situation should prevail as it should not be considered that the insurance companies would act in bad faith. Insurance companies should be relied upon to make payments which are appropriate.