The Crown Prosecution Service (CPS) has dropped charges against 11 solicitors and doctors after an investigation into an alleged insurance fraud.

The group had faced charges including conspiracy to defraud and false accounting in relation to the payment of after-the-event legal expenses premiums as well as referral fees. However, the CPS said today that the practices it had investigated were widely known in the sector and not regarded as fraudulent.

In a statement, the CPS said that following a review of the evidence by its head of central fraud Sue Patten, it decided to discontinue proceedings against all 11 individuals who had been listed for three trials next year.

The CPS said it brought the case following an investigation by City of London Police after a complaint from the insurance industry alleging wrongdoing by professionals in the conduct of personal injury litigation.

It said: ‘Lawyers and medical practitioners were found to have accepted referral fees from insurers. The insurance companies provided the clients of the lawyers and medical practitioners with insurance to cover the eventuality of not winning a case.

‘Where cases were settled in favour of the claimant, the lawyers and medical practitioners involved then recovered the cost of this insurance from the other party’s insurer. They did not however disclose the amount they had already been paid by way of commission. These professionals were thus receiving the commission twice and this is what was alleged to be fraudulent.

But it said: ‘Recent enquiries made with other insurers have revealed that the payment of referral fees was widely known within the industry and that those insurers consulted did not regard the non-disclosure to them of these fees as fraudulent.

‘The CPS has an obligation to keep cases under continuous review and following the internal review, supported by advice from trial counsel, we concluded that there is no longer any realistic prospect of conviction. Given the stage reached in the proceedings, the correct course of action was to offer no evidence,’ it said.

The CPS has advised City of London Police to refer the facts to the appropriate regulatory bodies - the Solicitors’ Regulation Authority and the General Medical Council.

A SRA spokesman said: ‘We have been liaising with City of London Police on this matter and are aware of the operation. We will be having further discussions with them before making a decision on how to progress.’

A City of London Police spokesperson said the force was disappointed that the case would not go to trial. He said: ‘The City of London Police began their investigation based on strong prima facie evidence presented to us by the insurance industry, and we have worked in close consultation with the CPS throughout.’