Fees for Claim Settlement in the Field of Personal Injury: Empirical Evidence from the Netherlands

Abstract

Based on data supplied by five Dutch insurers for the years 2001-2006, we analyse the development of hourly fees charged by attorneys and other legal assistants (claims agents) in personal injury cases. It concerns cases that did not go to court, but where according to Dutch law a fee shifting rule applies: that is, the (insurer of the) losing party must pay the costs of the winner's legal assistant. One may expect that such a fee shifting rule to some extent restricts competition in the market. The data indeed appear to suggest that in the Netherlands fees of personal injury lawyers have increased rather dramatically in recent years: more than twice the price and wage inflation, and much more than the fees of, e.g., a trustee in bankruptcies. We offer some explanations for this based on the well-known law and economics literature. Our computations are based on averages and means calculated for each of the years 2001-2006. The dataset, which consists of 1043 personal injury files, has been selected on the basis of a random sample, and includes observations of 1063 personal injury lawyers. An additional part of the research concerns an analysis of the total fees charged by legal representatives (number of hours worked times hourly fee, plus office costs) as a percentage of the amount of compensation paid to the personal injury victim.