Striking the right balance: Risk issues for the funders and insurers of volume litigation firms

Our recent update on Vanquis v TMS Legal¹ explained how those on the receiving end of bulk litigation are hitting back, giving claims management firms involved in the world of volume litigation pause for thought.

This article expands on that analysis, to identify the key themes arising out of a number of recent law firm collapses and the SRA’s response to them. It will be of interest to those who might find themselves exposed as a result, including litigation funders and insurers supporting bulk claims.

What do we mean by ‘bulk claims’ and ‘volume litigation’?

Consumer claims frequently attract the attention of law firms or claims management companies whose business model involves the management of very large numbers of similar claims, often on a conditional fee basis. Recent areas of focus for such activity include PPI mis-selling, cladding, and motor finance commission.

Regulatory scrutiny – key risk issues

A number of volume litigation law firms have very publicly failed in the last 5 years, leaving significant debts (on some reports, in the £hundreds of millions).
These statistics show that volume litigation is a key risk area, and the SRA as regulator clearly agrees. The key findings of its report published in August 2025², which followed an investigation into firms involved in the bulk consumer claims market, identified serious concerns about:

1. Inadequate client onboarding processes, including in relation to conflicts of interest;
2. Failure to fully consider clients’ best interests, and lack of due diligence regarding funding arrangements;
3. Failure to properly advise on costs, including (again) funding options;
4. Failure to comply with regulatory obligations when arranging ATE insurance for clients; and
5. Inadequate advice to clients about merits and prospects of success.

Our previous update on Vanquis illustrates one high-profile example of inadequate advice being provided to clients. The fallout from the collapse of bulk claims firms including, most notably, SSB Group, highlights other failings, as we explore below. These failings, and the resultant risks, are of obvious interest to those involved in funding and insuring the firms in question, who may have a right to claim against the firms as a result.

Claims management and preliminary advice

Whilst these are not new issues (those with longer memories might recall the insurers’ claims against “The Accident Group” law firms during the 2000s), the advent of online client onboarding has (as the SRA has acknowledged) made it easier for bulk litigation firms to handle large numbers of claims at once. This does not, however, provide any excuse for falling short of the usual standards of client care.

In particular, firms which market their services with promises of no risk of a bill for the defendant’s costs if things go wrong are at risk of falling foul of their regulatory obligations. The SRA’s investigation into SSB Group demonstrates that the failure to properly advise clients that it isn’t all upside – and that there may be a risk of liability for defendant’s costs – is something of a recurring theme.

What’s more, as we explained in our previous article, claimants and law firms representing them may be operating on the misguided assumption that they have a “free hit” in pursuing claims in the small claims court (i.e. claims worth up to £10,000) – with no (realistic) risk of adverse costs orders in the event their claims were unsuccessful. Vanquis illustrates how, to the contrary, law firms themselves might be exposing themselves to a direct risk of claims against them as a result.

Litigation funding, ATE insurance and adverse costs – SSB Group

SSB was a bulk litigation law firm acting on behalf of claimants pursuing claims concerning defective cavity wall insulation. The SRA received complaints that some of its clients were being pursued for adverse legal costs by defendants after discontinuing their claims, despite having been advised by SSB that after-the-event (ATE) insurance was in place to cover the adverse costs risk in the event the claim failed.

Firms arranging ATE insurance on behalf of clients must comply with the regulatory framework, which includes a requirement that the firm in question be authorised to arrange insurance³, provide clients with all the required information⁴ and (of course) obtain client instructions before taking out the policy.

SSB entered administration in early 2024, owing some £200 million to litigation funders. At that time, it was responsible for conducting 43,000 claims.

The SRA’s subsequent investigation is ongoing, but it appears that in some cases the ATE insurer declined cover. In others, SSB had failed to put in place sufficient cover (we understand that cover was limited to £15,000, whereas exposure for adverse costs was several times that amount), or indeed any cover at all.

Whilst each case will be determined on its facts, the primary recourse available to aggrieved clients of SSB and/or litigation funders who find that their expenditure is not in fact protected by ATE insurance is likely to be a claim in negligence against SSB’s professional indemnity insurance. Whether its insurers will in turn have claims against SSB (or the individual practitioners involved) is something we are watching closely. We will be focussing on the avenues funders and insurers might pursue to pass on or recover their liabilities (including to/from each other) in a future article in this series.

The domino effect

Some of the cases handled by SSB were inherited from Pure Legal, another bulk litigation firm focussing on housing disrepair/cavity wall insulation claims, which collapsed in 2021 with debts of over £40m. Of this, funders and lenders were owed more than £10m.

At that time, the directors of Pure Legal estimated the book value of the claims it was instructed to pursue was circa £45.5m. The administrators subsequently estimated recoveries of over £30m from ongoing claims. However, the vast majority of those claims have since been closed or discontinued without recovery; the administrators have reported that it is “highly unlikely” that there will be any material recovery by unsecured creditors, and doubts that even secured/preferred creditors (including HMRC) will recover what they are owed.

There is a circularity amongst firms operating in this industry – whereby one firm collapses and passes its claims (and associated WIP) onto another, only for that firm to fall into difficulty with even bigger debts.

The key theme here is the failure of claimant firms to properly vet claims and consider (and advise on) the merits on a case-by-case basis, and instead to pursue claims which were not properly arguable (itself one of the grounds for Vanquis’ claim against the law firm TMS Legal). Subject to the terms of arrangements with funders and/or insurers, these failures may well give rise to liability on part of the claimant firm to those providing funding and insurance.

The last word – future developments

Bulk litigation firms may have been dealt a blow by the Supreme Court’s recent high-profile decision in Hopcraft v Close Brothers, which concerned the legality of secret commissions paid by consumer lenders to car dealerships, in connection with finance agreements entered into between lenders and car buyers.

Whilst that decision did not entirely absolve lenders (in some circumstances the specific arrangements between consumers may have fallen foul of the requirement for fairness under the Consumer Credit Act), it clarified that car dealerships do not (typically) owe fiduciary duties to their customers, such that the scope for mass consumer litigation in this area was curtailed.

The decision is a blow to law firms who may view instructions from car buyers pursuing claims against lenders as “the next PPI” (and therefore the next big bulk litigation opportunity)⁵ and may mean that the bulk claims industry needs to find another source of work.

Looking ahead, we expect to hear yet more news of bulk claims failing, not least given the increased regulatory scrutiny and additional measures law firms will be required to take to address the issues the SRA has identified, which may serve to make this work less profitable. We may also see yet further intervention from the SRA, given the number of open investigations and public (and political) interest in the area, following the recent review by the Legal Services Board into the SRA’s handling of SSB’s collapse. Only last week the Law Society issued a response to the SRA’s consultation on volume litigation firms, urging the SRA to learn lessons from SSB’s collapse⁶ and conduct “robust checks” on law firms’ finances to avoid similar failures in future⁷.

The question for the funders and insurers is what steps they may be able to take to limit their exposure, and/or recover any losses, in that eventuality.

This article is part of a series of articles on volume litigation. Future articles will include updates on Vanquis as the claim progresses (as at the date of this article, we understand that TMS Legal’s application for permission to appeal is still to be determined), as well as an analysis of what this rapidly developing area of law means for litigation funders, insurers and the firms facing these claims.

Burges Salmon’s Dispute Resolution team is dedicated to achieving successful outcomes for our clients, focusing on resolving your disputes swiftly and effectively. We prioritise outcomes, not just process, in providing strategic and commercial advice.

If you would like to discuss any of the issues raised in this article, please get in touch with us below.