Lawyers face investigation over ‘illicit fees’ to claims management firms

Lawyers face investigation over ‘illicit fees’ to claims management firms

Lawyers are allegedly paying illicit referral fees to claims management companies for access to clients who say that they have contracted stomach bugs and other ailments while on package holidays.

At least 15 law firms are reported to be facing investigation for their potential role in a holiday illness scam that is costing the travel industry millions of pounds a year.

The claims companies target potential clients through Facebook with suggestions that they can easily be awarded compensation of £2,000 without written evidence, it is claimed.

Lawyers and claims firms are encouraging claims, which have risen by more than 430% in the past four years, according to Abta.

Gastric illness claims now represented 90% of personal injury complaints received by its members, a rise of 30% since 2013, according to the association.

Package tour businesses allege that claims companies have recently increased their marketing on social media and at resorts. Last year, one company drove a converted ambulance with the logo “claims clinic” around resorts in Tenerife.

The Times reported seeing one advert in which Facebook users are told: “Due to recent changes in law, you can now claim for holiday sickness with or without medical evidence. As long as you can verbally confirm that you suffered for 7 days or more and only ate at your all inclusive resort you will be on your way to a minimum of £2,000! For each member of your group!”

Another Facebook posting says: “This couldn’t be any easier guys and payouts take about 4 weeks on average. Well in time to pay for your family’s next summer holiday!!!”

The industry believes that law firms and claims companies are trying to use such cases to fill the gap in their revenues left by a clampdown on whiplash injuries that began in 2013.

Before that date claimants generally did not instruct lawyers because many travel companies settled directly with customers, Abta said.

Law firms are prohibited from paying kickbacks for personal injury cases. The Solicitors Regulation Authority (SRA) has told The Times that it is looking into allegations that could involve as many as 15 firms.

While claims management companies can settle claims for their clients, they must instruct lawyers if the case is disputed in court.

A spokesman for the SRA said that its investigation began after “various reports, including from those within the travel industry” were lodged with the regulator. It coincides with a similar inquiry that has been launched by the Ministry of Justice’s claims management regulator.

The SRA said that its investigation was focused on “the arrangements that firms have in place for the receipt of claims of this type and whether firms have acted in the best interests of their clients and upheld the proper administration of justice”.

Abta also claimed there was a legal loophole that was being “ruthlessly exploited” by claims managers. Holiday sickess abroad is not covered by existing laws on fixed costs, which limit the amount that lawyers can earn, even though customers can sue their package organiser in Britain.

The fixed costs regime is under review and Abta has called for overseas holiday claims up to £25,000 to be treated in the same way as other personal injury claims of that value.

An Abta spokesman said: “This would allow legitimate claimants access to justice but make the overseas holiday market sector considerably less attractive to claims management companies and reduce the eye-wateringly high legal fees currently charged in these cases.”

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