What is Legal Expense Insurance?
Posted on 4th September 2018
Legal Expense Insurance (“LEI”) is a form of add on cover at an additional cost to your normal building, contents or motor insurance which will provide you will an amount (usually about £50,000 to £100,000) to cover legal costs (your own and the opponents) in certain types of legal disputes, such as personal injury, employment, professional negligence, and property related disputes.
Each policy is slightly different so you should check the terms for details.
Can you choose your own solicitor?
Some policies will allow you to nominate your own solicitor from the start providing the solicitor accepts their terms and conditions.
Other policies will dictate that you accept a solicitor from their panel.
Whilst European law (Regulation 6 of the Insurance Companies (Legal Expenses Insurance) Regulations 1990 and even English case law (Brown Quinn & Another v Equity Syndicate Management Limited & Another (2012)) have tried to uphold an individual’s freedom of choice in legal representation, insurers have historically tried to curtail this right by only allowing a policy holder to choose their own solicitors once court proceedings have been issued.
The reality of this is that once a firm has been instructed to carry out the pre-action work, it does not usually make sense for a new firm to take over once proceedings need to be issued as this may delay and increase costs.
However, from 2017, the Financial Ombudsman, has now provided technical guidance that a client can choose their own solicitors from “the point that legal proceedings need to be started”.
This should now cover work from when it is clear that proceedings cannot be avoided because pre-action steps/negotiation have broken down, for example drafting the claim form, instructing a barrister to prepare particulars of claim, getting an expert to provide a report to substantiate the value of the claim.
I have recently had to argue this with an insurer who had not changed its own policy in compliance with this guidance.
You can also try and appeal to the insurers on exceptional grounds for the instruction of your preferred solicitor, such as complexity of the case, expertise/knowledge or even previous involvement of the solicitor/firm, and location.
Another exemption for nominating your own solicitors from the start is ‘conflict of interest’ but I have only really had this invoked successfully in one case – merely being dissatisfied with the panel solicitors chosen by your insurers is usually not enough.
Why is it useful?
In recent years there has been a huge challenge on how the average person can afford legal services.
Legal aid has been eradicated from most areas of law.
Success fees and insurance premiums are no longer recoverable from the opponent and so makes it more difficult for firms to offer No Win No Fee arrangements
Third party funders are likely to require a cut of the client’s damages and only willing to consider substantial cases.
The average person is highly unlikely to be able to privately fund a case all the way to a final hearing where costs can escalate into tens of thousands of pounds.
I have certainly seen a rise of the availability of LEI and clients being more aware of its usefulness.
The benefits of having funding via Legal Expense Insurance clearly outweigh the costs and so when it’s time to renew your home, contents, or motor insurance, then you should always opt to have the additional legal cover as you never know when you might need it. But a word of warning that a policy will only cover if the event complained off happened during the period of the policy – you cannot usually buy a policy hoping it will cover a pre-existing event. And again always check the finer details and what sort of exclusions will apply. If you are keen to have the freedom to choose your own solicitor from the start then take that into account when shopping for a new insurance policy.