No win no fee accident claims: CFAs, DBAs, success fees and ATE

Conditional Fee Agreements: how they actually work

A Conditional Fee Agreement is a written agreement between solicitor and client under which the solicitor’s fees are payable only if the client succeeds in the claim, with a ‘success fee’ uplift payable on success. CFAs were introduced by section 58 of the Courts and Legal Services Act 1990 and gradually expanded from limited categories to the whole of civil litigation. The current operating framework is the Conditional Fee Agreements Order 2013 (SI 2013/689), which made the most significant change since the Jackson reforms: the success fee ceased to be recoverable from the losing defendant (it had been recoverable since 2000) and instead became deductible from the winning claimant’s damages, with a hard cap.

Under a personal injury CFA, the solicitor’s base costs are calculated at their normal hourly rates. If the claim succeeds and inter-partes costs are recoverable (above the small claims track), those base costs are paid by the at-fault insurer. The success fee - a percentage uplift on the base costs - is paid by the client out of damages, subject to a cap of 25% of damages excluding future loss heads. Below the small claims track (most OIC portal claims), no inter-partes costs are recoverable; the solicitor takes only the success fee out of the damages, and many firms either decline these files or charge an additional ‘portal fee’ within the 25% cap.

The 25% cap is computed on damages for: past pain, suffering and loss of amenity; past loss of earnings; past care and treatment costs; past special damages other than vehicle-related credit hire and credit repair which are usually recovered separately by the accident management company. The cap excludes future loss elements (future loss of earnings, future care, future treatment, Smith v Manchester awards) so that a high-value claim with substantial future-loss damages cannot be eroded by a 25% deduction across the whole award. This is the structural protection for the most catastrophically injured claimants.

Damages-Based Agreements: the alternative

A Damages-Based Agreement is the alternative ‘no win no fee’ structure: the solicitor agrees to be paid a fixed percentage of the client’s damages, with no separate hourly fee. The legal basis is section 58AA of the Courts and Legal Services Act 1990, given effect by the Damages-Based Agreements Regulations 2013 (SI 2013/609). The personal injury DBA percentage is capped at 25% of recovered damages, inclusive of VAT and counsel’s fees. The principal practical difference from a CFA is that under a DBA the solicitor’s recovery is a clean single percentage; under a CFA it can involve two elements (recovered base costs from the insurer and a success fee from the client).

DBAs are less common than CFAs in personal injury practice. The 25% all-inclusive cap (covering counsel’s fees and the solicitor’s base fee within the percentage) is tight, and the Solicitors Regulation Authority’s guidance on DBA drafting is strict. The 2013 Regulations have been criticised as ambiguous on questions of partial recovery, mid-case termination and concurrent retainers, and several proposals for reform have been made over the past decade. In practice, most personal injury solicitors offer a CFA-with-success-fee model rather than a DBA, even though both are described colloquially as ‘no win no fee’.

After-the-Event insurance: what it covers and when it is needed

After-the-Event (ATE) insurance is a legal expenses policy taken out after the accident, designed to cover the principal risks the claimant carries on a loss: the other side’s costs (where QOCS does not apply or has been displaced) and the claimant’s own disbursements (court fees, medical report fees, expert witness fees, search fees, copying charges). ATE premiums are typically deferred and self-insured - the premium is payable only if the claim wins, and is deducted from damages at settlement. Where the claim is lost, the policy responds to the protected exposures and no premium is payable.

Since the Jackson reforms and the introduction of QOCS in April 2013, ATE has become less critical for straightforward personal injury cases because QOCS protects the unsuccessful claimant from paying the defendant’s costs in most circumstances. The remaining exposures - claimant’s own disbursements, and adverse costs in the narrow QOCS exceptions (fundamentally dishonest claims, struck-out claims, Part 36 enforcement) - are covered by ATE. For high-value or expert-heavy claims with substantial disbursements, ATE remains the standard protection.

ATE premiums vary widely. A typical OIC-portal-level claim with modest medical expert fees might attract a premium of £100–£300, sometimes less; a multi-track claim with multiple expert disciplines and a fast-tracked timetable can attract a premium of £2,000 or more. The premium is deducted from damages on success; on a loss, the policy responds and no premium is owed. Premiums are not recoverable from the defendant for most personal injury work under the post-Jackson regime; they sit within the claimant’s side of the costs equation.

Qualified One-Way Costs Shifting and its exceptions

QOCS is the procedural reform that transformed personal injury costs in 2013. Under CPR 44.13–44.17, an unsuccessful personal injury claimant is not generally ordered to pay the successful defendant’s costs. The rule operates by capping any costs order against the claimant at the level of damages awarded - usually nil where the claim has failed entirely. The justification is that the chilling effect on meritorious claims of full adverse-costs exposure was disproportionate to the benefit of deterring weak ones.

QOCS has several exceptions. CPR 44.15 disapplies the protection where the claim is struck out for disclosing no reasonable cause of action, is found to be an abuse of process or has been conducted by the claimant in a way that is likely to obstruct the just disposal of proceedings. CPR 44.16(1) removes the protection in cases of ‘fundamental dishonesty’ - see the leading authorities Howlett v Davies [2017] EWCA Civ 1696 and Ivey v Genting Casinos [2017] UKSC 67. CPR 44.16(2) allows enforcement up to the level of damages awarded where the claimant has failed to beat a defendant’s Part 36 offer.

Fundamental dishonesty is a sword the defendant insurer increasingly deploys to displace QOCS, particularly on whiplash claims and slip-and-trip claims. A claimant found to have been fundamentally dishonest loses QOCS protection entirely and faces a full adverse costs order. The threshold is high - dishonesty going to the heart of the claim, not peripheral exaggeration - but the case law has expanded the concept over the past decade. ATE insurance is the practical hedge against fundamental dishonesty findings, though no honest claimant should be exposed.

Part 36 offers and the tactical economics of settlement

CPR Part 36 is the central tactical mechanism of personal injury litigation. A Part 36 offer is a formal written settlement proposal carrying automatic costs consequences if the offeree does not beat it at trial. The offer has a 21-day acceptance period (the ‘relevant period’) during which standard costs consequences apply. After the relevant period, the consequences harden.

If a defendant makes a Part 36 offer that the claimant rejects, and the trial award is no better than the offer, the claimant pays the defendant’s costs from the end of the relevant period to the date of judgment, subject to the QOCS cap. If a claimant makes a Part 36 offer that the defendant rejects, and the trial award equals or exceeds it, the defendant pays the claimant’s costs on the indemnity basis from the end of the relevant period, with interest on costs at up to 10% above base rate and a 10% additional sum on damages (capped at £75,000). The asymmetry is deliberate: claimants are encouraged to make realistic offers, defendants are penalised for under-offering.

Part 36 is the reason most personal injury claims settle without trial. Both sides assess the offer-and-award arithmetic continuously, and the dominant strategies converge on a settlement zone that reflects each side’s view of the litigation risk and Part 36 cost exposure. A panel solicitor’s skill in personal injury practice is largely the skill of running the Part 36 chess game well.

Third-party litigation funders and the changing economics

Beyond CFAs and DBAs, a smaller proportion of UK personal injury work is funded by third-party litigation funders - institutional investors who finance the litigation in exchange for a share of any recovery. The funder is not the client’s solicitor; the relationship is governed by a separate funding agreement that runs alongside the solicitor-client retainer. Funder shares typically range from 25% to 40% of damages depending on the claim profile, with the percentage justified by the funder’s up-front capital outlay and the risk of total loss on an unsuccessful claim.

The Court of Appeal’s decision in R (PACCAR Inc) v Competition Appeal Tribunal [2023] UKSC 28 destabilised parts of the funding market by ruling that certain funding agreements were ‘damages-based agreements’ within section 58AA of the Courts and Legal Services Act 1990 and so subject to the DBA Regulations 2013. The decision forced funders to restructure many agreements to comply with, or fall outside, the DBA regime. The effect for personal injury claimants has been limited because most funded PI work uses CFA / ATE structures rather than direct funding, but the broader funder ecosystem has tightened and some firms have withdrawn from PI funding.

Where third-party funding is in play, the SRA Code of Conduct requires the solicitor to disclose the arrangement to the client, to explain the funder’s rights and to make sure the client retains the autonomy to settle and discontinue the claim free from funder interference. The client is the client; the funder is a commercial backer with contractual rights but no professional relationship with the claimant. Reputable funders sign up to the Association of Litigation Funders’ Code of Conduct, which sets a baseline of behaviour including non-interference with settlement decisions.

Before-the-Event insurance: the household policy you may already have

Many UK motor and home insurance policies include a Legal Expenses Insurance (LEI) add-on, sometimes by default and sometimes by paid extra. LEI is a form of Before-the-Event insurance: it pays for legal costs incurred in pursuing a personal injury claim arising from a covered accident, often without engaging the CFA or DBA mechanics. Coverage limits are typically £50,000-£100,000 in total legal spend, which is more than sufficient for the vast majority of PI files.

The structural advantage of LEI is that the client does not have a success fee deducted from their damages - the legal costs are paid by the insurer under the LEI policy and the client keeps 100% of the compensation. The structural disadvantage is that the LEI insurer usually retains the right to direct the choice of solicitor (typically to a panel firm). Under the Insurance Companies (Legal Expenses Insurance) Regulations 1990 the client has the right to choose their own solicitor once court proceedings have actually been issued, but in the pre-action phase the LEI insurer can direct to the panel firm.

Every UK claimant should check their motor and home insurance policies for LEI cover before signing a CFA. The cover is often present but underused because claimants do not realise they have it. A panel solicitor will routinely ask about LEI as part of the funding conversation and will explain the trade-off between an LEI-funded route and a CFA-funded route.

What every claimant should ask before signing a retainer

Before signing a CFA or DBA, every claimant should have written answers to: (1) what percentage of my damages will be deducted as a success fee, and on what damages elements is it calculated? (2) what disbursements do I pay and are they recovered from the at-fault insurer or deducted from my damages? (3) am I being offered ATE insurance, what does the premium cover, and is it deferred? (4) what happens if I lose, and what is my personal exposure? (5) what happens if I want to terminate the agreement mid-case, and what are the cancellation costs? (6) is this firm bringing in a third-party funder or factoring my future fees, and what disclosures apply?

The answers must be in writing and the document - the retainer letter and CFA / DBA - must comply with the regulatory framework. A non-compliant CFA is unenforceable and the solicitor cannot recover their fees. SRA Principle 2 (acting with integrity) and SRA Principle 7 (acting in the client’s best interests) underpin the solicitor’s duty to explain the funding arrangement clearly and to give the client the opportunity to ask questions before signing.

Where CityGrip introduces a client to a panel solicitor for personal injury work, the referral terms are disclosed upfront: the firm’s identity, the nature of the introduction, the referral arrangement (we do not charge for the introduction), and the typical deductions the firm makes from settlements. The client retains the right to instruct any other solicitor of their choice. Related guides: injury claim referral, personal injury claim car accident, whiplash compensation, accident claim process UK, who pays for what.