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Title: Litigation risk

Date: 05 July 2013

Question

I read in one of your recent columns that you mentioned something called “litigation risk” and that it can lead to a lower compensation payment. In my own case my solicitor has referred to this also and is suggesting I accept 30% lower than his full valuation of my injuries and financial loss because of it. However it has not been explained – what is it exactly and why would it apply? I would be very grateful if you could answer this as soon as possible so I can consider your answer before going back to my solicitor.

Kath Williams, Brecon

Answer

Firstly it may be helpful to explain what litigation is – it is the process of taking a case to a court of law so that a judgment can be made. A judgment is a court’s determination of the case before it. The majority of personal injury claims never reach court. However due to fact that motorcycle accidents involve more serious injuries than other accident claims more is at stake to the paying party so they are contested more often. This together with common arguments on whose fault the accident was means that court proceedings are often commenced in bike accident claims – i.e. they are litigated. However not many actually reach a court hearing to determine liability (blame) or quantum (value).

Perhaps fewer than 5% of serious motorcycle accident claims reach court.

Litigation risk is a generally accepted concept of a Claimant sometimes accepting a 20-25% deduction on the value of their claim to reflect the risk of litigation. That is the risk of attending court, getting a judge prejudiced against motorcyclists, poor witness presentation on the day, the day throwing up a sudden surprise in what is said or even presented last minute in evidence etc. The point being going to court is risky and litigation risk “buys off” the risk sometimes.

It is important to remember that if you end up at court it means that lawyers on each side have fairly opposing views of what the correct result should be and clearly the judge will have to make a decision. That decision is always capable of going the wrong way. I should mention that litigation risk does not refer to contributory negligence (the Claimant’s own element of blame where relevant) but can take account of the risk of a finding of contributory negligence.

I don’t advise accepting a reduction for litigation risk unless there are obvious risks but when 25% is not much monetarily it often makes sense as clients don’t like attending court. However in a big case 25% can be a huge amount of money and careful consideration must be given to all relevant factors.

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