Troubled UK finance group Imperial Consolidated has been hit by a further crisis because it cannot retrieve millions of pounds owed to it by Manchester- based insurer Claims Advance.
Sources close to both companies say Claims Advance is refusing to pay Imperial at least pounds 6m and it seems unlikely this money will ever be returned. Claims Advance was formed in May 2000 as an insurance company offering people a way to bring personal-injury cases using legal advice.
Under these personal-injury cases, a solicitor used a loan from Imperial to pay partly for the medical fees identifying the extent of the injuries. Another part of the loan went on buying insurance from Claims Advance in case the litigation failed.
The scheme was designed, after the ending of legal aid for such claims in April 2000's Access to Justice Act, to allow people to try to get compensation without facing financial risk. If claimants won, they repaid the solicitor and the loan from their damages, but if they lost, the insurance was meant to pay the costs.
Various solicitors are thought to have given Claims Advance premiums to buy insurance for 10,000 cases using Imperial's money. Average premiums were pounds 800. But 4,000 cases were cancelled by the solicitors after people dropped their claims and more were discontinued for other reasons.
But Claims Advance is thought to be using the wording of its policies to refuse to pay out at least pounds 6m from these cases.
Claims Advance's managing director, Steve Kirby, refused to comment on the value or detail of the cases involving Imperial Consolidated, but denied the insurer has done anything wrong. …