As well as provided on a stand-alone basis, Legal Expenses Insurance(LEI) is increasing sold as part of another primary insurance policy, often presented as a free (or low cost) addition. LEI is also now commonly included as part of packaged (fee paying) bank accounts and other related financial products such as credit cards. Quite often, most people are unaware that they have such cover.
Typically, cover is provided for the legal expenses that the policyholder may incur in most personal injury, consumer, property and employment disputes, as well as for any award of the other party’s legal costs. Some policies cover matters that potentially may go before any tribunal or court. Normally, there is a requirement that if a policyholder makes a claim for legal expenses, any legal action for which the expenses are incurred must have a reasonable prospect of success. The policyholder is also usually required to accept any reasonable offer of settlement.
When a policyholder puts in a claim under a policy of this type, most insurers will assess the dispute in-house (or perhaps with the assistance of one of their panel of solicitors), and will then determine whether there is an arguable case. If the insurer concludes that the case has little prospect of success, it may simply notify the policyholder that it is not prepared to accept the claim.
What if I do not agree with the assessment of my case?
You may wish to seek a second opinion. If your insurer’s view of your case is wrong then, with assistance, you may be able to get them to change their mind. The Legal Advice Centre (University House) is a charity and independent specialist advice agency which specialises in providing help in such circumstances. If you require such support, then contact them at firstname.lastname@example.org and/or on 020 8980 5522.
Choice of solicitor
Where the case appears more complex, or seems to have a good chance of succeeding, insurers usually appoint one of their panel of solicitors to progress the matter. These panels are set up by insurers to deal with cases on commercial terms that are agreed in advance.
Legal expenses policies often give the insurer the freedom to choose which solicitors to appoint for advice and assistance up to the time where legal proceedings start – unless there is a conflict of interest. However, once proceedings start (when the legal “claim form” is issued) – or if there is a conflict of interest – the law allows policyholders to choose their own solicitors. These regulations are wide enough to include legal proceedings pursued and defended in tribunals – for example, employment tribunals – as well as proceedings in courts.
Often the terms of a legal expenses policy do not generally guarantee any particular firm of solicitors, any specific location or any minimum size of firm. All they promise is a panel firm of solicitors prior to legal proceedings being issued. After legal proceedings have been issued – and to comply with statutory regulations – the policyholder can choose their own solicitor.
Once legal proceedings have started: next steps
Once legal proceedings are issued – or if there is a conflict of interest – the policyholder will be entitled to choose their own solicitor. The policyholder’s own choice of solicitor is not bound by any terms of the insurance policy, as this is a contract made between the policyholder and the insurer. As a result, the insurer will require the policyholder’s solicitor to agree to the insurer’s non-panel member terms of appointment. This is a separate contract entered into between the insurer and the solicitor.
When is it generally advisable for insurers to agree the appointment of the policyholder’s choice of solicitor?
Much depends on the circumstances of the individual case, but the Financial Ombudsman considers that, in general, policyholders making claims in connection with motor accident disputes, minor personal injury claims and routine consumer disputes are unlikely to suffer any significant prejudice if the insurer simply appoints a solicitor for them from its own panel.
But the Financial Ombudsman expects insurers to agree the appointment of the policyholder’s preferred solicitors in cases that involve large personal injury claims, or that are necessarily complex (such as those involving allegations of medical negligence). The Financial Ombudsman considers that insurers should also agree the appointment of the policyholder’s preferred solicitors in cases that involve significant boundary or employment disputes (especially if there is a considerable history to investigate and assess).
More generally, there are other circumstances where it may be unreasonable, or out of line with good industry practice, if the insurer fails to agree to the appointment of the policyholder’s own choice of solicitor. This could be the case, for example, where the policyholder’s own solicitors have already had considerable involvement in (and knowledge of) the issue giving rise to the dispute, or related matters.
Further advice and help
All legal advisors, at first contact with a client who has a potential tribunal or Court claim, should properly explore whether the client has LEI cover. Why? In a time of financial constraint and Legal Aid cuts this provides the client with potential access to a significant financial resource which can fund their legal case, funding which includes disbursements such as expert reports and counsel’s fees, and provides protection against the other party’s legal costs.