Indemnity Insurance: What to ask your No-Win No-Fee solicitors to avoid unexpected legal fees

No-win no-fee agreements are there to give people who can’t afford legal fees access to a solicitor and legal advice.

But, in some cases, when the law firm does not have the correct protections in place, customers can be left to fork out hefty legal costs at no fault of their own.

This was the case when the Sheffield-based SSB Law firm went into administration earlier this year. The firm had been offering clients a no-win no-fee agreement on cavity wall installations which had been fitted into their homes around a decade ago.

The customers were seeking legal help, as the expensive building work, which had been implemented to improve the insulation in the home had started to harbour dampness and mould in older properties.

But the issues arose, when SSB Law, who was working for the clients on a no-win no-fee basis reportedly did not have indemnity insurance in place to cover the costs for customers in unsuccessful cases.

This has sparked attention in the media, as some customers have to pay tens of thousands of pounds in legal fees as a result.

On BBC Breakfast, Ben Thompson addressed the situation, after Charlie Stayt questioned why these customers are facing bills after signing up for a no-win no-fee agreement.

Ben Thompson said:

“It stems from claims made by dozens of people who had cavity wall insulation fitted ten years ago, but many later started noticing damp or mould in their houses as a result of the insulation often not being suitable for those older properties.

“A few years later thousands of people, mainly in the north of England were approached by law firms, including Sheffield-based SSB Law. It said it would help them claim against the insulation costs on a no-win no-fee basis. That means if the case doesn’t succeed, the claimant doesn’t have to pay legal fees.

“So imagine the shock when some of them lost their cases and started receiving legal bills for tens of thousands of pounds.

“It’s not yet clear exactly why when they had been told that would not happen. But some reports suggest it may be down to problems with the insurance the law firm had in place to cover costs for failed cases.”

One of SSB Laws customers, Yousef Patel told the BBC he has been left a “broken man” after being faced with more than £26,500 to pay in fees, plus interest. He said:

“I have no chance to pay. I feel like I’m a broken man. It is scary to me because I have never been in this situation in my lifetime. I have never owed to anybody. I can’t sleep. My life has stopped at the moment.”

A support group set up for these customers said it has been inundated with calls, and a solicitors firm says it is currently helping almost 1,500 customers.

Huddersfield MP Barry Shearman has also raised the issue in Parliament. He said:

“We just don’t know how many people are involved. We know it’s a lot. Hundreds, thousands, we don’t know. But what we do know is that these court costs make people very vulnerable.

“I have had people come to me and they have been asked for £16,000, they haven’t got it and they will be warned that they will eventually need to sell their homes. That’s a dreadful thing hanging over anyone’s head.”

Brett Dixon, Law Society Council Member explained what questions customers seeking no-win no-fee legal agreements need to ask their law firm to ensure they are protected. He said:

“When someone goes to a solicitor it is usually because of a significant life event or crisis point for example when they have been injured at no fault of their own, or where they have had some other life event such as buying a house or they’re getting a divorce and one of the reasons that people do go to solicitors is because there is this safety framework for when things go wrong. The difficulty is with complex areas, often we don’t know the questions to ask.”

‘No-Win, No-Fee’ – How to make sure I’m protected?

Mr. Dixon explained that no-win no-fee customers need to ask their solicitor what happens if they lose their case what happens to the firm’s legal fees, and what happens to the other side’s fees.

 “The background is that no-win-no-fee was introduced as civil legal aid was removed by the government. It’s there for people who can’t afford the legal help they need so there is a way to get that legal help and what you need is to be certain that you won’t pay your solicitors fees if your case isn’t successful because you can win or lose at court.

“But you also need to be certain that there is something in place about the other side costs because you will have to pay them if you are unsuccessful at court and that’s where the insurance point comes in.

“You would expect that the solicitor would have put something in place for that insurance. if they’re not, and if they have been negligent the indemnity insurance they are required to carry would be in place to cover that eventuality,” he said.

Mr. Dixon explained that there are measures in place for customers affected by negligence, for example, by making a complaint to the SRA, to the legal ombudsman or “you can rely on the solicitors indemnity fund which is a pot that all solicitors put into for difficulties that might arise if a firm closes down”.

Meanwhile, the government and the solicitor’s watchdog have both said they are investigating appropriate action to be taken if standards haven’t been met. Those affected are being advised to seek legal advice as they may be able to claim on SSB Law’s insurance.

What is indemnity insurance?

Indemnity insurance is a type of insurance policy that compensates an insured party for certain unexpected damages or losses up to a certain limit—usually the amount of the loss itself. Insurance companies provide coverage in exchange for premiums paid by the insured parties.

Oakwood Solicitors are members of the SRA and hold professional indemnity insurance to ensure clients are protected on a no-win no-fee basis.

Further reading

Professional service negligence – Oakwood Solicitors

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