Clients with before-the-event (BTE) legal expenses insurance can now change from panel solicitors to one of their choice earlier than was previously the case following a subtle but significant shift made by the Financial Ombudsman Service (FOS).
The point at which policyholders can exercise their choice of solicitor has been the subject of argument for years, and since 2003 FOS’s clear interpretation of the underlying European regulation has been that they could only do it once proceedings had formally begun.
However, this has now changed and updated technical guidance says: “A policyholder should be allowed to choose their own solicitors from the point that legal proceedings need to be started – i.e. when negotiations have failed and it has been decided by the lawyers involved that it will be necessary to issue proceedings to progress the legal case.
“This means we would normally expect the policyholder’s own chosen solicitor to be covered to do work involved in preparing the claim form and any other work needed to start the proceedings.”
Back in 2003, FOS said it reached its conclusion “in the absence of clear guidance from the courts in support of this alternative interpretation” – it is not clear what has now changed.
The Law Society has taken credit for the change after arguing “for some time that a client should have the freedom to choose their own solicitor prior to the issue of proceedings, as well as afterwards”.
Legal expenses insurers have long argued that assigning cases to their panels enabled them to control costs sufficiently to keep the cost of before-the-event cover low.
The other circumstance in which policyholders have a right to choose their own solicitors before proceedings become necessary is where there is a conflict of interest.
The FOS guidance says: “Policyholders sometimes claim that their disagreement with the appointed solicitor’s legal advice is a conflict of interest.
“We do not view these kinds of disputes as conflicts of interest. A conflict of interest arises only if the solicitor would be in breach of their code of conduct, or would be ‘professionally embarrassed’ if they continued to act.”
A recent report on BTE by the Civil Justice Council steered away from making any recommendations on the choice of solicitor issue – recognising how sensitive it was – but more generally found that it has “a considerable role in improving access to justice in the current legal landscape”, with the advice helplines that come with them of particular benefit.