Posted by Neil Rose, Editor, Litigation Futures
My heart sank yesterday when the Law Society launched a survey on legal expenses insurance (LEI), “following feedback from our members about problems with LEI-funded cases, in particular securing freedom of choice under LEI”.
The Employment Lawyers Association, Association of Personal Injury Lawyers (APIL) and Motor Accident Solicitors Society are also in on the wheeze.
It is, I’m sure you’ll say, a legitimate cause for concern. As the society put it, under both EU law and the law of England and Wales, an insured party’s right to choose their solicitor is protected, and recent case law has emphasised that insurers should not offer to pay so little under a policy that clients cannot meaningfully choose their own solicitor. “However feedback from Law Society members shows that insurers’ practices may be restricting people from choosing their own solicitor.”
So why did my heart sink? Because we have been here so many times before. Chancery Lane and APIL in particular have been whingeing about this for more years than I care to remember. Previous calls for evidence have usually dangled the carrot of bringing a test case if the right facts can be found; to date, and we’re talking a period of more than a decade at least, the courts have not been troubled.
The issues haven’t changed in that time. The fact there has been no challenge tells me that neither the Law Society nor APIL think they have much of a chance.
They have perhaps been encouraged by a couple of non-Law Society/APIL cases in recent times – Eschig in the European Court of Justice and Webster Dixon in the English courts. The latter may have been helpful to a degree in highlighting the issue of the rate at which insurers pay non-panel firms (when they are allowed), but they haven’t made any fundamental change to the LEI model.
Are the Law Society and the rest looking for a problem that doesn’t really exist? Are they, dare one suggest, just vocalising the unhappiness of the vast majority of law firms which are not lucky enough to be on legal expenses insurers’ highly exclusive panels?
The most recent figures from the Financial Ombudsman Service (FOS) record that out of the 508,881 cases it dealt with in 2012/13, some 907 related to LEI – 0.002% of the total. Even when you took out non-insurance matters and PPI claims, they amounted to just 3% of insurance-related complaints.
Given how many LEI policies are in circulation, this is not a problem of any kind of scale. LEI is not the answer to all of a policyholder’s legal problems, but doesn’t pretend to be.
According to FOS, most LEI complaints involve the question of whether the proposed action has reasonable prospects of success, the issue of choice of solicitor, or allegations of maladministration in relation to the policy and/or the claim.
Its position on choice of solicitor has been established for several years. Under the Insurance Companies (Legal Expenses Insurance) Regulations 1990, which implemented an EU directive, a policyholder has the right to choose their own solicitors – but only once legal proceedings formally start (or if there is a conflict of interest). Pre-issue, the insurer can dictate which solicitor is used, and FOS accepts this is done for “legitimate commercial and quality-control reasons”.
There have been efforts to argue that proceedings effectively start earlier than the issue of the claim form, but they haven’t gone anywhere. I would imagine that relatively few policyholders then choose to switch solicitors at the point where proceedings are issued – although the Law Society suggests some insurers put barriers in the way of enforcing this right.
FOS’s current position is that while, obviously, each case is judged on its own merits, “we are likely to decide that the policyholder should be able to appoint their own solicitors from the start only in exceptional circumstances”.
The society also argues that policyholders are disadvantaged by the fact that panel solicitors are often on the other side of the country. But FOS says that with modern communications, the location of a panel solicitor “should not affect the way the case is actually handled. If a face-to-face meeting is required, lawyers can travel to meet the clients (or vice versa depending on individual preferences)”.
So where does that leave the Law Society and friends? Nowhere much, I imagine. FOS is reviewing its LEI guidance, which may be a chink of light. Alternative business structures owned by legal expenses insurers may add a new wrinkle.
I may of course be proven wrong, but I suspect this latest call for evidence will be as effective as all the others.