the real plaintiff lawyer costs in personal injury claims...the real plaintiff lawyer costs in...

The real plaintiff lawyer costs inpersonal injury claims

Jason Kroeger, SIRA & Kenneth Chua, EY12 October 2016

sira.nsw.gov.au

• Background & Regulation

• Claims Cost Disclosure Portal

• Scheme Efficiency

• Detailed Findings

• Further Developments

OutlineThe real plaintiff lawyer

costs in personal injury

claims

12 October 2016

Background & Regulation

Jason Kroeger, SIRA

12 October 2016

sira.nsw.gov.au

• Prior to the Claims cost disclosure project the State Insurance Regulatory

Authority (SIRA), had no knowledge or transparency of legal costs being

charged to the claimant from their legal provider.

• In 2008 the SIRA engaged an external firm, to review a sample of

individual claim files to assess the full extent of legal costs

• Despite the review confirming some of the anecdotal evidence, the review

was on a sample of only 56 claims across 25 law firms

• In October 2015 the regulation was amended to allow the inception of the

CCD project

BackgroundA long standing issue

The real plaintiff lawyer


claims

12 October 2016

• To regulate the maximum recoverable costs for:

• legal; and

• medico- legal services provided in relation to motor

accidents claims

RegulationKey function of the regulation



claims

12 October 2016

• To ensure that transaction costs relating to motor

accidents claims do not unreasonably contribute the cost

of CTP payable by NSW motorists

RegulationRationale for regulation



claims

12 October 2016

• 23 (1) The object of this clause is to enable the Authority

to obtain information about costs in order to advise the

Minister as to the efficiency and effectiveness of the

motor accidents scheme under the Act.

• 23 (2) It is the duty of a legal practitioner who represents

a claimant when a claim is finalised (regardless of whether

damages are to be paid to the claimant) to ensure that

the Authority is provided, in the manner and time

approved by the Authority, with a costs breakdown in

relation to the claim.

RegulationClause 23 (Oct 2015): Determining efficiency of the scheme



claims

12 October 2016

• 23 (3) The duty in sub-clause (2) applies to all claims

regardless of whether the claim is exempt from

assessment under section 92 of the Act or whether there

has been contracting out under clause 8 of this

Regulation. However, the duty does not apply to a claim

in a motor accidents matter if the claimant incurs no legal

fees in the matter.

• 23 (4) If a barrister and a solicitor act for a claimant, the

duty in sub-clause (2) falls on the solicitor and not the

barrister.




claims

12 October 2016

• 23 (5) The Authority may provide any information

contained in a costs breakdown to the Minister and may, if

directed to do so by the Minister, publicise statistics

produced from any such information. (6) The Authority

may forward to the Legal Services Commissioner any

information obtained under this clause.




claims

12 October 2016

Claims Costs Disclosure

Jason Kroeger, SIRA

12 October 2016

sira.nsw.gov.au

Claims Costs Disclosure The Claims Costs Disclosure Process



claims

12 October 2016

Stage 1

• Insurer creates claims record

• Insurer sends the claims records to SIRA

Stage 2

• SIRA validates entry

• Email prompt to lawyer

Stage 3

• Lawyer completes “intelligent” form

• Submits to the Authority

Stage 4

• Incomplete

• Follow up emails sent


• Prior to the Claims cost

disclosure project the SIRA,

had no knowledge or

transparency of legal costs

being charged to the

claimant from their legal

provider.

• This made it impossible to

ascertain to the full or total

efficiency of the NSW CTP

Scheme.

The view of the NSW CTP scheme – prior to CCD



claims

12 October 2016

Holistic View of the NSW CTP Scheme Prior to the Claims

cost Disclosure Project

ClaimantBenefits


• We (SIRA) have now received

over 6000 claims cost

disclosure submissions from

the claimants legal

representatives.

• Based on this data we (SIRA)

now have a much more precise

picture on the total scheme

performance and the legal fees

charged to the claimants by

the claimants lawyer

The view of the NSW CTP scheme – currently



claims

12 October 2016

The Current Holistic View of the NSW CTP Scheme Post

Claims cost Disclosure Inception

ClaimantBenefits

Legal costscharged byClaimantLawyers

• The data provided to us (SIRA) is the missing information

about claims – specifically how much the claimant

received, and what the lawyer received for managing the

settlement.

• This information has enabled SIRA to advocate for

changes to the scheme to ensure the funds provided to

the claimants is spent on rehabilitation and compensation

and not divided or swallowed up in legal cost.

Claims Costs Disclosure All payments are now accounted for



claims

12 October 2016

Scheme Efficiency

Kenneth Chua, EY

12 October 2016

• The chart shows the efficiency

of the scheme since 2000

before and after adjusting for

the estimated total legal

plaintiff cost is shown in the

diagram

• Efficiency is a measure of how

much of the premium is paid to

claimants

• By using the results from CCD

analysis, we are estimating a

reduction in scheme efficiency

from 52% to 45%

Scheme efficiencyImpact of legal cost adjustment on scheme efficiency



claims

12 October 2016

37%

52%

11%Other

Scheme Costs (37%)

Claimant Benefits

(45%)

Legal & Investigation

Expenses (18%)

Scheme Efficiency: Before and After Adjustments

Detailed Findings

Kenneth Chua, EY

12 October 2016

• Analysis was based on the CCD data extract as at 1 August 2016 (except for Law Firm

Under Review which was based on CCD extract at 29 March 2016).

• June 2016 PIR data was used

• We have decided to use all the CCD data in our analysis (excluding claims not matched

to PIR), which produces a lower result for the extent of legal costs

Detailed FindingsData used



claims

12 October 2016

• Legal plaintiff fees are split in the following components:

• Regulated costs - Legal Plaintiff payments visible in settlement negotiations and

reported in the Personal Injury Registry (PIR) data received

• Contracted Out fees – This is additional legal plaintiff payments not captured in the

PIR, but disclosed in the CCD. This was previously unknown.

• The table below summarises our findings from the CCD analysis

Detailed FindingsResults from CCD database



claims

12 October 2016

Contracted Out Fee % Regulated Cost Fee % Total Legal Plaintiff Fee %Total Legal &

Investigation Fee %

10.4% 10.3% 20.7% 28.0%

Cost as a % of Claim Size

69%

13%

9%

4%

2% 2% 2%

Legal Plaintiff Cost Breakdown

Solicitor fees inc party/party

Barrister/counsel fees

Medico-legal specialist reportsincluding allied health

Other e.g. interpreter, traveletc.

Other expert fees paid

Attending GP, specialist reportsand clinical notes includingallied health

Previous lawyers' fees

• Majority of the costs goes to

solicitor fees, with the % of

claim cost increasing as

claim size decrease. This

trend is also apparent for

Medico-legal specialist

reports

• Barrister/counsel fees is the

second largest cost, with the

% of claim cost increasing as

claim size increase.

Detailed FindingsBreakdown of total legal plaintiff cost



claims

12 October 2016

Detailed FindingsLegal plaintiff cost by claim size band



claims

12 October 2016

0%

5%

10%

15%

20%

25%

30%

35%

40%

< $50k $50k -$100k

$100k -$200k

$200k -$500k

$500k -$700k

$700k -$1M

> $1M

% o

f cla

im s

ize

Claim Size Bands

Total Legal Fee by Claim Size Bands

Total Legal Plaintiff Fee as a % of Claim Size

• The table below shows how legal costs vary by:

• Injury severity

• Whole person impairment (WPI) based on modified AMA 4

Detailed FindingsLegal cost by injury severity and WPI



claims

12 October 2016

Injury Severity, WPI threshold Total Legal Plaintiff Costs % Legal Defendant Costs % Investigation %

Minor, WPI <=10% 29% 8% 2%

Moderate/Serious, WPI <=10% 24% 7% 2%

Minor, WPI >10% 16% 4% 1%

Moderate/Serious, WPI >10% 14% 5% 1%


• Law firms exhibiting high interaction factors with some medical service

providers were selected and analysed separately to rest of the law firms

• The table below is extracted from the CCD, which outlines the difference

between the law firms under review and other law firms

• Of all total claims, law firms under review make up 20% of claim count (9%

of total payments).

• Majority of the claims for them are minor severity claims (85% by claim count), while other law

firms have 65% of claim count that are minor severity claims

• The number of claims handled by these law firms has approximately tripled over the period of

2011 to 2015

Detailed FindingsCCD extract Law firms under review



claims

12 October 2016

Law Firms Proportion by Claim Count "Contracted Out" Fee % PIR Regulated Cost Fee % Total Legal (Plaintiff) Fee %

Law Firms under review 20% 16% 14% 31%

Other Law Firms 80% 10% 10% 20%


Further developments

Kenneth Chua, EY

12 October 2016

• In the NSW CTP scheme:

• Monitoring of efficiency in the scheme

• Identifying areas for investigation

• Legal cost regulation reviews

• For other personal injury schemes:

• Raise awareness of the full extent of legal costs

• A roadmap for implementation of a similar arrangement

Future developmentsFuture development and uses for the CCD



claims

12 October 2016

Q & A

Jason Kroeger, SIRA

& Kenneth Chua, EY

This presentation may contain information that relates to the regulation of workers compensation insurance, motor accident third party (CTP)

insurance and home building compensation in NSW. It may include details of some of your obligations under the various schemes that the State

Insurance Regulatory Authority (SIRA) administers. However to ensure you comply with your legal obligations you must refer to the appropriate

legislation as currently in force. Up to date legislation can be found at the NSW Legislation website legislation.nsw.gov.au.

This presentation does not represent a comprehensive statement of the law as it applies to particular problems or to individuals, or as a

substitute for legal advice. You should seek independent legal advice if you need assistance on the application of the law to your situation.

This material may be displayed, printed and reproduced without amendment for personal, in-house or non-commercial use.

the real plaintiff lawyer costs in personal injury claims...the real plaintiff lawyer costs in...

Documents