LEGAL EXPENSES INSURANCE – DO I HAVE TO USE THEIR PANEL SOLICITORS? DO I HAVE FREEDOM OF CHOICE?
News article published on: 22nd May 2020
Legal expenses insurance is normally bought with household contents insurance and most people are not even aware they have such cover on their policies. It often provides cover for people living in the insured property in relation to personal injury claims, employment disputes and other civil disputes.
It is also added on as optional to car and motorbike insurance policies and you would need to opt for it as it adds a further small charge to your premium on renewal.
Some policies allow freedom of choice in the wording of the policy but most do not.
The short answer to the issue of freedom of choice is that you should argue you have it, or let us argue this on your behalf if you would prefer to instruct us rather than a “panel” solicitor suggested by the legal expenses insurers.
Often the response from a legal expenses insurer is that they will only consider appointing a solicitor of your choice under the policy at the time that proceedings need to be issued – not at the start of the claim. This is in our view incorrect.
The law concerning Legal Expenses Insurance
The law relating to this is set out in the Insurance Companies (Legal Expenses Instance) Regulations 1990 which implemented the European Legal Expenses Insurance Directive 87/344/EC. Regulation 6 states that the policyholder has a right to choose their own lawyer in “any inquiry or proceedings”.
In 1993, the Financial Services Ombudsman declared that a legal expenses insurer could restrict freedom of choice until legal proceedings were necessary providing this was stated when the policyholder purchased the policy.
In 2010, the Financial Services Ombudsman stated that in large and complex claims Legal Expenses Insurers would be expected to allow greater freedom of choice from the beginning of an action rather than when proceedings were issue.
A couple of European Court of Justice decisions followed which can be interpreted to say that freedom of choice arose before the commencement of any inquiry or proceedings. The case of Brown-Quinn and Webster Dixon LLP –v- Equity Syndicate Management Limited and Motorplus Limited  EWCA Civ 1663 means that we can argue for freedom of choice and the insurers can restrict the indemnity provided by the policy their panel solicitor rates or we can negotiate on the rates with them.
We will sometimes agree to work on a no win no fee basis with you, with no success fee, in return for the legal expenses insurers agreeing to indemnify you for any adverse costs risks only. We will then report to the legal expenses insurers in terms of these risks as the case progresses. In suitable high value cases this is often a good way to proceed. As ever, each case is assessed by us on a case by case basis.
Blog post written by Rob Aylott, solicitor in the Personal Injury team.