**This article was updated in October 2019**
What is Legal Expenses Insurance?
Legal Expenses Insurance is insurance which is usually tagged onto (usually for an additional premium) home insurance, travel insurance or onto a motor insurance policy. In addition, some credit cards provide Legal Expenses Insurance. Legal Expenses Insurance usually provides for limited use of lawyers (not always solicitors or Legal Executives) to the policyholder in the event of a very limited number of incidents.
Legal Expenses Insurance which is usually bought with home insurance would often provide legal cover for people living in the insured property in relation to employment disputes, contractual claims, personal injury claims and often property-related claims, specifically for the insured home, such as for boundary disputes.
Legal Expenses Insurance bought with car insurance would usually only provide access to lawyers in relation to claims which relate to the car, such as road traffic accident claims involving personal injury to the policyholder and usually would cover claims in relation to damage to the insured car.
It is possible to buy standalone Legal Expenses Insurance. If you don’t have a house, or a car, we strongly recommend that you purchase this insurance, particularly if you are an employee.
Can the policyholder use their preferred lawyer?
It depends. At Truth Legal we have represented our clients under most Legal Expenses Insurance, including DAS, Direct Line, ARAG, Co-Operative, Family Legal Protect and many others. Unfortunately, often these insurers try to put needless obstacles in the way of our clients using our services under their own Legal Expenses Insurance, which they have purchased in good faith. Some insurers are fairer than others and we at Truth Legal thank those fair Legal Expenses Insurers who act with probity, allowing access to justice for their policyholders.
In our experience, what tends to happen when people have a dispute is that they have no idea that they even have Legal Expenses Insurance. Some lawyers speculate that, because Legal Expenses Insurance is usually so cheap, and because usually the policy provides £50,000-100,000 of legal cover, that the insurers deliberately do not highlight the benefits of such insurance once purchased, because it isn’t in their interests to do so.
Applying the same logic, insurers are disincentivised from allowing their insured to use their policyholder’s preferred lawyers, preferring – and then signposting/strong-arming – their policyholders to use the insurer’s panel solicitors.
If insurers accept that their policyholder has a viable claim (and this is often an uphill struggle as many people will testify to), then insurers usually crowbar their insured to use their panel solicitors, often hundreds of miles away from where their policyholder lives. It isn’t unfair to say that these panel solicitors work hand-in-glove with the insurers. In our experience, Legal Expenses Insurers usually accept what their panel solicitors tell them, regardless of the calibre of lawyer who advises them. Therefore, if a panel solicitor (often a paralegal) takes the view that a claim has reasonable prospects of success and therefore the policy should provide cover the insurers financially support the claim. Conversely, if a panel lawyer takes the view that a claim doesn’t enjoy good prospects of success, then it is an uphill struggle to get the insurers to pay for legal representation, even when the panel lawyer is wrong.
What should you do if your insurer’s panel solicitors reject your claim?
In our experience, panel solicitors do not always make the correct assessments. We find it incredibly unfair when a paralegal (an unqualified lawyer) at a panel firm rejects a claim, when the claim actually enjoys good prospects of success. Often, we have to obtain an Opinion from a barrister in order to get an insurer to change their mind. People in this position could either use a Direct Access Barrister themselves in order to obtain an Opinion, or they could instruct a firm like ours to obtain the Opinion, ensuring that the Barrister has all the necessary paperwork, with every angle of the case investigated.
In all walks of life – and law is no different – there are competent lawyers, less competent lawyers and incompetent lawyers. We think that we are pretty good, with reviews which we are proud of, particularly when compared with the reviews of panel firms.
What does the law say about freedom of choice?
The key legal provision is the Insurance Companies (Legal Expenses Insurance) Regulations 1990, which implemented the European Legal Expenses Insurance Directive 87/344/EEC. These Regulations, at regulation 6, state that the right of a policyholder to choose their own lawyer in ‘any inquiry or proceedings’. The precise wording is:
Freedom to choose lawyer
6.—(1) Where under a legal expenses insurance contract recourse is had to a lawyer (or other person having such qualifications as may be necessary) to defend, represent or serve the interests of the insured in any inquiry or proceedings, the insured shall be free to choose that lawyer (or other person).
(2) The insured shall also be free to choose a lawyer (or other person having such qualifications as may be necessary) to serve his interests whenever a conflict of interests arises.
(3) The above rights shall be expressly recognised in the policy.
Back in 1993, the regulatory organisation which we now know as the Financial Ombudsman Services, declared that a Legal Expenses Insurer could restrict freedom of choice until legal proceedings were issued, provided the policyholder was made aware of this when buying the policy. More recently, in 2010, the Ombudsman modified its position so 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 only when proceedings were issued.
On a European level (though with Brexit upon us the likely status of these regulations and the related case law is unknown at the time of writing) the European Court of Justice gave a ruling in Eschig v UNIQA Sachversicherung AG [2009] C-199/08, which was interpreted by the Financial Services Authority (FSA) to say that freedom of choice arose before the commencement of any inquiry or proceedings. Thereafter, in Stark v DAS Österreichische Allgemeine Rechtsschutzversicherung AG [2011] C-293/10, the European Court of Justice ruled that restrictions on freedom of choice that rendered the freedom essentially meaningless were not permissible. The British courts took a similar view in the Court of Appeal case of Brown-Quinn v Equity Syndicate Management Ltd [2012].
What does the Financial Ombudsman Service say about Freedom of Choice?
According to their website here, they say:
Many policyholders choose to remain with the panel solicitor after the issue of legal proceedings. But some policyholders take the view that only someone they’ve chosen will represent their interests vigorously and impartially. They may complain that the firm of solicitors that you’ve chosen is in an inconvenient location, for example.
The law allows policyholders to choose their own solicitors to act for them from the point that legal proceedings start.
We’re likely to decide that the policyholder should be able to appoint their own solicitor from the start of their insurance claim and before legal proceedings are necessary, only in exceptional circumstances.
We’d usually expect the policyholder’s chosen solicitor to prepare the claim form and do any other work needed to start the proceedings.
The solicitor chosen by the policyholder isn’t bound by any terms of the insurance policy. The insurance policy is a contract made between you and the policyholder.
You need the policyholder’s chosen solicitor to agree to your standard terms of appointment. This is a separate contract entered into between you and the solicitor.
Insurers don’t usually object to using a policyholder’s own solicitor, although for commercial and quality-control reasons, they often prefer to use solicitors from their own panel.
What should you do if your Legal Expenses Insurance won’t allow you to exercise Freedom of Choice?
If you want to use your preferred solicitors, such as ourselves, and the Legal Expenses Insurers won’t let you, then you could allow the panel firm of solicitors to issue the claim for you (assuming that they support it) and then switch solicitors. At Truth Legal, we specialise in clients who want to switch solicitors.
You could always argue that your case is “exceptional”, possibly because you have already formed a bond with your preferred solicitor; or that you need to see your solicitor face-to-face; or because of a health issue or disability you need easy access to your preferred solicitor; or that you have already paid for your preferred solicitors; or perhaps because the timescales are so tight that you shouldn’t risk your claim being out of time by sending it to another law firm.
In addition, you could complain to the Financial Ombudsman Service at this link.
If you have the benefit of Legal Expenses Insurance and would like us to represent you under that policy, then please make an enquiry today and we will be pleased to assist you.
