Legal Expenses Insurance - choose your provider carefully

One of the best ways to fund litigation is through legal expenses insurance.  Such insurance is often included as part of a household, travel, pet or a motor insurance policy. Most policies cover legal fees and disbursements up to £50,000 or £100,000. Legal expenses insurance can be a valuable asset should you find yourself making or defending a legal claim.

Under the Legal Expenses Insurance Regulations 1990 anyone who is insured has the right to choose their own lawyer. However, legal expenses insurance companies will often try to persuade the insured to use their “panel solicitors”.

Panel solicitors take on “bulk work” at a reduced rate and to make a profit will assign “panel” cases to newly qualified solicitors and paralegals so they can make more profit from the reduced rates paid by insurers.

Employment claims are often complex and multi faceted and newly qualified solicitors and paralegals often find themselves out of their depth. Even if the case is handled by an experienced solicitor often that solicitor will be handling so many “panel” cases that the correct amount of time care and preparation cannot be given to each individual case. This means the insured’s chance of winning is reduced.

Last year we acted against a person represented by a “panel” firm. We won the case hands down and got a costs award because their case had been inadequately prepared.

Another common complaint is that legal expenses insurers argue that the insured does not have a reasonable prospect of success. “Reasonable prospects of success” (only) means that the insured has at least a 51% chance of succeeding at tribunal.

I acted for a client this year who had been told by her panel solicitors that her case did not have reasonable prospects of success.  In their haste to reject the claim (because it was too complex) they overlooked a major part of her claim. The letter explaining why they rejected her claim missed pertinent facts because they had never met the client or taken detailed instructions from her.  I challenged the “panel solicitors” assessment of prospects of success, took the case on and won more than a year’s wages for my client.

Many complaints are made about panel solicitors who take on bulk litigation work, engage paralegals to assess claims and who inform the insured that they haven’t got reasonable prospects of success, purely because it is not cost effective for them to run the case when they are paid “panel rates”.

When you insist on your right to use a solicitor of you choice, legal expenses insurance providers will limit the rate they will pay your solicitor, so it is important to buy a policy that gives you the best value for the premium paid.

For example providers such as DAS and First Assist will only pay a non-panel solicitor at a rate of £100 (trainee rate or paralegal rate) whereas Privilege and Direct Line will pay a rate of £190-220 (5 year qualified solicitor rate).

It is obviously much better to be represented by a qualified solicitor than a paralegal if you are forced to litigate, so you should check what rate the insurer will pay to your chosen solicitor before you choose the policy and legal expenses insurer provider.

Because of  the amount of complaints made to the Financial Ombudsman Service about Legal Expenses Insurers and their practices, the Law Society has launched a survey, which it describes as an investigation into the “harmful insurer practices affecting consumers”, including restricting the right to choose their own solicitor.

Check the policy details to see if any restrictions are imposed on your right to choose your own solicitor, what rate will be paid and who provides the service on behalf of the insurer before you buy the policy. If you have the benefit of legal expenses insurance and litigation is pending, do not be deterred from insisting on your right to instruct solicitors of your choice.

Please note Birkett Long cannot recommend Legal Expenses Insurance products or Legal Expenses Insurance providers. If you require advice on the types of Legal Expenses Insurance products available, please contact an insurance broker