The High Court has recently held that before-the-event (BTE)
legal expenses insurers cannot reject a policyholder's choice of a
non-panel solicitor on the sole basis of cost.
Case background and summary of facts
(1) Christine Brown-Quinn (2) Webster Dixon LLP v (1) Equity
Syndicate Management Ltd (2) Motorplus Ltd; Webster Dixon LLP v (1)
Equity Syndicate Management Ltd (2) ACM ULR Ltd; (1) Janine Baxter
(2) Webster Dixon Ltd v (1) Equity Syndicate Management (2)
Motorplus Ltd. [2011] EWHC 2661 (Comm)
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case
The three clients had various claims against other parties for
which they wished to bring or continue proceedings with the benefit
of their before the event (BTE) insurance. One client instructed a
non-panel firm of solicitors from the beginning. The other two
clients were both referred to panel solicitors by the insurers, but
in each case the case handler left the panel solicitors and joined
the non-panel firm. Here there were cases which from the onset the
client sought to instruct a non-panel firm (onset cases) and cases
where there was a transfer of instructions (transfer cases) to a
non-panel firm.
The position taken by the insurers was that, in both types of
case, they were entitled to insist that if an insured did not wish
to instruct a panel solicitor any other solicitor of the insured's
choice must not charge more than the rates prescribed by their
terms of appointment for non-panel solicitors, here an hourly rate
of 125. In the case of two of the clients this rate of
125 was increased to 139 (non-panel rates). In each
case there was a dispute about the rates and the insurers informed
the firm that they would not agree to their acting for all the
claimants. The firm continued to act for the three clients. The
insurers in the case refused to agree to what the firm considered
to be reasonable rates.
The High Court on 21 October declared that BTE insurers were not
entitled to decline to accept the insured's choice of solicitors
under the policy on the basis that their rates of remuneration were
in excess of those stipulated by the insurers in their terms of
appointment of non-panel solicitors. The fees of solicitors who had
not agreed to the prescribed rates should be assessed pursuant to
CPR Part 48, not restricted by those rates but taking account of
them.
The defendants were granted leave to appeal to the Court of
Appeal. Grounds to appeal are due to be lodged by no later than
Wednesday 23 November.
Law Society comment
This case raises an important issue for the profession regarding
freedom of choice of solicitor pursuant to The Insurance Companies
(Legal Expense Insurance) Regulations 1990 (the Regulations) which
were enacted under section 2(2) of the European Communities Act
1972 with the intention of implementing the Legal Expense Insurance
Directive (87/344/EEC). The decision supports the Law Society's
view that insurers cannot impose terms on non-panel solicitors
which effectively deny a client the right to choose their own
solicitor to act for them under the terms of a legal expense
insurance policy.
The way in which insurers interpret these regulations has
concerned the Law Society for some years and this case addresses
one significant issue. However, there is a further question about
the point at which clients are entitled to instruct their own
solicitors. Insurers appear to be interpreting this narrowly as
being the point at which proceedings are commenced. The Society
takes the view that, in order for true freedom of choice to exist,
it needs to be at a much earlier stage. This question was not dealt
with in this case and until such time as it is dealt with in a
proper context, solicitors must rely upon Crosbie v Monroe ([2003]
3 Costs LR 377) in which Lord Justice Brooke stated 'the
dealings between the parties which lead up to the disposal of a
clinical negligence claim are to be treated as 'proceedings' for
the purposes of that paragraph even if the dispute is settled
without the need to issue a claim form.'
The Law Society will continue to take an active interest in the
case. In the meantime, we would be very interested to learn of any
occasion when an insurer has denied a client the right of freedom
of choice of solicitor.
Details should be sent to martin.heskins@lawsociety.org.uk.