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Concern Over Legal Ombudsman’s New Compensation Powers

19th January 2015

“Complainants may not receive compensation they are entitled to”, according to a senior spokesman for the Law Society, ahead of the handover of responsibility for claims management companies (CMCs) to the Legal Ombudsman at the end of January 2015.

The remarks were made in a recent letter to the Ministry of Justice (MoJ), which expressed concern that the Legal Ombudsman “may struggle to secure compensation for complainants” because of the “differences between law firms and CMCs.” 

The letter warns of the differences in the regulations relating to professional indemnity insurance, whereby, unlike solicitors, CMCs only require insurance if they undertake personal injury work. As a result of the “lack of consumer protection” plus the “unstable nature of the claims management market”, complainants may not obtain the compensation they are entitled to receive.

Tackling professional negligence

In August 2012, the government first announced its intention to extend the power of the Legal Ombudsman to consider customer complaints about the services provided by regulated claims management companies.

Proceeding under newly enforced sections of the Legal Services Act 2007, the Legal Ombudsman would be able to provide “a new avenue of redress” for clients of claims management companies and assist the Claims Management Regulator in tackling professional negligence by driving out poor standards of market practice.

Recently, talks were held between the claims management regulator and the Legal Ombudsman, which looked at the enforcement options to shortly become available.

Under the new responsibilities granted by the Act, the Legal Ombudsman will in future have the same powers available as a lawyer. This will mean that they will be able to instruct CMCs in particular actions, such as the return of documents, reimbursement of costs, the issuing of an apology and to order the payment of costs for any “distress or inconvenience” caused by a firm’s  poor service.