Written by Doran Yacobi
The Victorian Legal Services Board (VLSB) recently updated their guidance for professional and ethical obligations for lawyers acting in motor vehicle accident claims.
This is a relevant topic for insurers to be across as many of the complaints that start investigations come from keen eyed and well-trained insurance claims officers.
The guidance is relevant to insurance claims across the country as the underlying Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015 that the VLSB rely on is also the same framework adopted in New South Wales and Western Australia, with similar rules found in the remaining States and Territories under their local legislative frameworks.
Car Napping Bringing the Legal Industry into Disrepute
The guidance uses strong language to describe the practice known as ‘car napping’ whereby not at fault vehicles end up in a repairer and hire car network and owners are forced to commence legal action against insured third parties. It is described as predatory and reprehensible and that lawyers who accept these instructions are bringing the profession into disrepute and acting outside their professional obligations.
What Should Claims Officers Be Looking Out For?
The guidance reminds lawyers that they must act in the best interests of their client and sets out that their client is the driver or owner of the vehicle and not the repairer or credit hire car operator. This means communicating directly with the client to obtain informed instructions on all aspects of litigation including any insurance held by the other party. Lawyers should not mislead the Court and other parties that they have received instructions from the client when they had no direct contact. Claims officers should be vigilant that the third party hasn’t previously contacted the insurer or their own insured and provided contradictory statements such as they had no need for a replacement vehicle whilst their vehicle was being repaired.
Claims handlers should also be on notice as to whether principals in charge of legal practices are actively managing their junior operators and are not acting of their own free will when they observe unreasonable responses to request for information or documents.
The guidance also directs lawyers that upon receipt of an Authority to Act or referral they should be directly contacting the client to confirm they understand what they signed and they wish to engage their law firm. Often insurers will receive requests for admissions of liability from lawyers the same day as the accident which can be problematic.
The guidance has as a minimum standard that lawyers send their clients copies of any documents addressed to them such as an assessment report, invoices or agreements. Insurers should be on notice for when third parties state they have never seen documents when they are brought to mediations or at a final hearing.
A common disappointing aspect in this area of insurance, is the hurriedness of many lawyers to issue legal proceedings before insurers have had reasonable opportunities to assess the demands. The guidance makes clear that issuing proceedings without first providing clear advice to the client about their rights and options and then receive clear instructions is a breach of their obligations. An example where insurers might observe this unacceptable practice is when the net loss component is paid out to the third party and the only issue in dispute is the credit hire car claim, yet legal proceedings are promptly issued. The third party should reasonably wish to settle the outstanding demands quickly given any financial recovery is forwarded to the credit hire car provider and there are superior Court decisions that make clear the demands are excessive with a large portion being unrecoverable.
Will this Mean a Tougher Approach is Taken by the Regulator?
Of particular note is the guidance for lawyers to remove any terms providing an authority to act in template documents sent to referrers and replacing those terms with consenting to the potential client's details being provided to a law practice. The Authority to Act is a still a common document found in the industry and we look forward to the VLSB taking a stricter approach of those still relying on these catch all provisions.
Should you wish to discuss any of the above, please contact Doran Yacobi on 03 9947 4504 or one of the Ligeti Partners team members on 03 9947 4500.
A link to the guidance: Guidance: acting ethically in motor vehicle accident claims | VLSB+C