The legal profession is unprepared for conflicts of interest in personal injury law that will occur from 2012, the Gazette has been told. Such conflicts could leave PI lawyers open to negligence claims and increase professional indemnity insurance premiums.

The problem arises from the willingness of insurers to ‘capture’ both sides of the same claim. Although this is already a feature of the market, it is likely to be exacerbated by the arrival of alternative business structures.

Concerns also centre on the use of quantum assessment tools (QATs) and PI damages ‘matrices’ by insurers and defendant law firms. Susan Brown, partner at claimant-focused firm Prolegal, said that such tools can underestimate the true value of a claim: ‘Most of us feel… that insurers go to the bottom of the scale, and knock another 10% off.’ Brown said she has ‘hands-on experience of this’.

Currently, law firms who act for both claimant and defendant clients refer one, or both, clients to other advisers when a direct conflict is identified.

However, the same insurer can have a role on both sides, and so have a role in calculating quantum. If QATs are used with their current ‘calibrations’ unchanged, claimants may settle for undervalued awards, leaving their legal advisers open to professional negligence claims. Brown added: ‘If you look at the "care package projects" being developed by banks and insurers, you can see they are seeking to control the system.’

From 2012, banks and insurers will be permitted to set up and own firms established as alternative business structures. The SRA says it does not expect to intervene on the issue. The use of matrices or QATs is ‘a commercial choice’ and ‘up to firms’, a spokesperson said.

DAC Beachcroft’s head of strategic litigation, Andrew Parker, told the Gazette that whether or not a firm used the same matrices or QATs as an insurer client ‘depends on the individual firm’. However, if an insurer is using a particular approach, ‘they want [their law firm] to use a similar approach’. It was wrong, Parker said, to assume bad faith on the part of insurers: ‘They are looking to pay claims at an appropriate settlement.’

The Jackson review of civil litigation proposed a judicially approved QAT as a solution, but the idea has made little progress. Brown and Parker said it deserved further consideration.