£30,000 Success Fee Disallowed After Inadequate BTE Insurance Checks

A recent decision in Evans v Fletchers Solicitors Ltd is an important reminder that funding arrangements should never be treated as a mere formality. The Senior Courts Costs Office disallowed a success fee of approximately £30,000 after finding that insufficient enquiries had been made into the client’s potential before-the-event (BTE) legal expenses insurance.

For solicitors and law firms, the judgment reinforces the importance of investigating all available funding options before entering into a Conditional Fee Agreement (CFA). It also highlights how failures at the outset of a case can lead to costly solicitor-client disputes years later.

At ARC Costs, we regularly advise on funding arrangements, retainers and solicitor-client costs disputes. In our experience, challenges to success fees often hinge not on the wording of the CFA itself, but on whether the firm can demonstrate that it properly explored alternative funding options and kept the client fully informed.

What happened in the case?

The claimant instructed solicitors following a serious personal injury accident and entered into a Conditional Fee Agreement in 2017.

The underlying claim later settled for around £250,000, but the claimant challenged the deduction of the success fee from those damages. The dispute centred on whether the claimant could instead have relied upon BTE legal expenses insurance available through an existing home insurance policy.

Although enquiries had been made with the insurer, the court concluded that they were limited and lacked the persistence necessary to establish whether suitable cover was available.

The judge was critical of the approach taken, finding that the investigations into legal expenses insurance were insufficient and that a more thorough effort should have been made before placing the client under a CFA.

Why was the success fee disallowed?

The court found that, on the balance of probabilities, some level of BTE insurance would likely have been available to fund the claim.

Whilst there was uncertainty over the precise extent of cover, the judge concluded that the possibility had not been properly explored. Had suitable enquiries been undertaken, the claimant would probably have used the existing insurance rather than entering into a CFA carrying a success fee.

As a result, the court disallowed the success fee in its entirety.

From a costs perspective, the decision demonstrates that courts are willing to look beyond the existence of a signed retainer and examine the process by which the funding arrangement was put in place.

This case illustrates why funding advice should never be treated as a box-ticking exercise. Solicitors should be able to show that they made genuine enquiries into available BTE insurance and gave the client enough information to make an informed decision. If that evidence is missing, the recoverability of a success fee may be placed at risk.

In practice, we often find that disputes arise many years after the CFA was signed, by which point the attendance notes and correspondence generated at the outset of the retainer become critical evidence.

Why BTE insurance matters

Before-the-event legal expenses insurance is commonly included within:

• Home insurance policies
• Motor insurance policies
• Bank accounts
• Credit cards
• Trade union memberships
• Membership organisations

Where suitable cover exists, it may allow a claimant to pursue litigation without entering into a CFA or sacrificing part of their damages through a success fee.

That is why proper investigation at the beginning of a case is so important.

The importance of documenting funding advice

At ARC Costs, we regularly review files where funding arrangements are challenged as part of solicitor-client costs disputes.

One recurring issue is the lack of documentary evidence demonstrating that meaningful enquiries were undertaken.

Good practice includes:

• Asking detailed questions about existing insurance policies.
• Recording discussions with the client about available funding options.
• Following up with insurers where responses are incomplete.
• Keeping attendance notes explaining why a CFA was ultimately recommended.

These relatively straightforward steps can significantly strengthen a firm’s position if funding arrangements are scrutinised later.

Could this judgment lead to more challenges?

Potentially. The decision may encourage clients to examine whether they were correctly advised about funding options before agreeing to pay a success fee.

Whilst every case will turn on its own facts, firms should recognise that courts may scrutinise not only the wording of retainers but also the enquiries undertaken before those retainers were signed.

For solicitors, that means robust client care procedures and careful record-keeping remain essential.

Lessons for law firms

The judgment provides several practical takeaways:

• Investigating BTE insurance should involve genuine and documented enquiries.
• Clients should receive clear advice on the advantages and disadvantages of different funding options.
• Funding decisions should be supported by comprehensive attendance notes and correspondence.
• Firms should avoid treating enquiries into legal expenses insurance as a routine administrative exercise.

In our experience, early attention to these issues can avoid substantial disputes later in the life of a claim.

Why this matters from a costs perspective

Success fees often represent significant sums, particularly in complex personal injury and clinical negligence litigation.

Where funding arrangements are challenged, the financial consequences can be substantial.

The decision in Evans v Fletchers Solicitors Ltd reinforces that recoverability depends not only on having an enforceable CFA but also on demonstrating that the client was placed in the most appropriate funding arrangement based on proper enquiries and informed advice.

How ARC Costs can help

At ARC Costs, we regularly advise on solicitor-client costs disputes, funding arrangements and legal costs recovery.

Our team assists law firms with:

• Reviewing Conditional Fee Agreements
• Advising on success fee disputes
• Assessing retainers and funding documentation
• Solicitor-client assessments
• Detailed assessment proceedings
• Costs recovery strategy

Conditional Fee Agreements remain an important route to justice, but firms should never assume they are the default option. This case is a reminder that taking the time to investigate alternative funding and recording those enquiries properly can make all the difference if costs are challenged in the future.

For firms looking to protect both their clients and their recoverability, careful funding investigations at the outset of a case remain one of the best investments they can make.

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