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Court of Appeal issues insurer warning over limiting freedom of choice

14 December 2012

In a Court of Appeal test case before the event (BTE) legal expenses insurers cannot restrict an insureds right to appoint their own lawyer based solely on cost.

In Christine Brown-Quinn and Webster Dixon LLP v Equity Syndicate Management Limited and Motorplus Limitedthe insurer refused to accept a non panel firm of solicitors appointed by the insured because its hourly rates were higher than those prescribed in the insurers terms of appointment for non-panel solicitors.

The Court of Appeal judge confirmed that a refusal to accept a non - panel firm of solicitors because their rates exceeded those outlined in the insureds policy for the appointment of non panel lawyers was in breach of The Insurance Companies (Legal Expense Insurance) Regulations 1990.

However in what will be seen as a partial victory for insurers the judge also concluded that legal expenses insurers were only obliged to pay the non panel legal rates as outlined in their insureds policy and no more.

Nichola Evans, an expert in legal expenses insurance at law firm Browne Jacobson commented:

"This is an important decision for legal expenses insurers and a timely reminder that they must be careful not to deny an insured the right to appoint their own legal representatives under a legal expense insurance policy based on cost alone.

"There are sound reasons why insurers encourage the use of panel firms in that it helps to keep costs down and allows them to retain close control over any litigation.

"The judges ruling over costs will be welcomed by the industry as it makes crystal clear that non panel legal expense costs can be restricted to those outlined in the insureds policy and allows for proper reserving and premium setting.

"BTE insurers may want to re-visit their standard terms and conditions in light of this decision to ensure they comply with The Insurance Companies (Legal Expense Insurance) Regulations 1990. They should also consider writing into those policies contractually binding restrictions on the rates that can be claimed by an insured that chooses to instruct their own firm of solicitors if they have not already done so.

"However it is important that the rates outlined must not be set at a level that would seriously impede choice and render the freedom to choose meaningless because no solicitor would are prepared to take on the work."


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Lakhbir Rakar

Lakhbir Rakar

PR Manager