Legal Expenses Cover: Your right to choose your representative


Under The Insurance Companies (Legal Expenses Insurance) Regulations 1990, Regulation 6 provides that 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) and this shall be expressly recognised in the policy.

However lawyers often come up against the argument from a legal expenses provider that the insured does not have the choice of lawyer prior to the issue of proceedings and that they nominate their own panel solicitors to deal with the insured’s claim.

Therefore, if the insured person wishes to choose their own lawyer up to the stage of proceedings being issued, they must enter into a CFA with the lawyer of their choice, and their lawyer is then to apply for indemnity at point of issue.

The decision of Erhard Eschig v UNIQA Sachversicherung AG (C-199/08) (10 September 2009, Second Chamber) in which it was held the European Directive was intended to ensure freedom of choice for insured litigants from the initial investigative stages of the claim, has challenged the insurance provider’s stance. However this case concerned a Class Action and may therefore be argued as distinguishable from individual cases; the Court held that Article 4(1)(a) must be interpreted as not permitting the legal expenses insurer to reserve the right, where a large number of insured persons suffer loss as a result of the same event, to select the legal representative of all the insured persons concerned.

The Financial Services Association (FSA) is giving consideration to what impact the judgement in Eshig will have upon individual legal expense insurance contracts.

Regulation 6 of the Legal Expenses Insurance Regulations 1990 provides that the choice of lawyer begins in the event of enquiry or proceedings, and in the previous case of Sarwar –v- Alam (2001) the Court of Appeal found that this would include during the pre-action protocol. It may be of assistance to study the wording of the individual insurance policy concerned, as most standard policies indemnify the insured against the costs of access to justice, not just litigation.

Panel solicitors often come at no, or a very low, cost to the insurer so it may be argued that it benefits the insurer more than the insured, which equates to a disadvantage over the insured’s choice of solicitor.

The FSA has asked insurers to confirm, by 30th September 2010, what actions they have taken to ensure that the terms of their policies comply with the regulations.

Policyholders and lawyers alike are encouraged to continue to challenge the position of legal expenses insurers where the right to choose comes into question.

This article was written by Joanne Milne, in our Road Traffic Accident team.

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