Condemnation in the starkest of terms was handed to legal expenses insurers by the Court of Appeal yesterday.
The court was delivering judgment on the appeal by before-the-event (BTE) insurers in the case of Christine Brown-Quinn and others v Equity Syndicate Management Limited and Motorplus Limited. It was all about that now ancient chestnut of BTE insurers trying to restrict their policy holders’ freedom of choice of solicitors.
Lord Justice Longmoor, in a judgment with which Lords Justice Lloyd and McFarlane agreed, reached this overall conclusion:-
“It is quite wrong that, despite the warning shot delivered to legal expenses insurers by this court in Sarwar v Alam  insurers should many years later be issuing policies which do not comply with the Regulations. General Conditions 2.3 and 5 are in breach of the Regulations in the ways I have explained and must be either deleted or comprehensively redrafted”.
Earlier in his judgment (Paragraph 8) his Lordship had observed that:-
“The facts of this case have revealed that the insurers exhibit an insouciance to their obligations under the Directive and the Regulations which leaves one quite breathless”.
He went on to explain that whilst the European Directive and Regulations made it entirely clear that a policyholder’s freedom to have the lawyer of his choice should be expressly stated in the contract with insurers, the terms and conditions before the court provided “almost the opposite”.
It’s all too familiar a scenario for personal injury claimant solicitors, despite the fact that the Court of Appeal has been telling the insurance industry for at least a decade not to do it. For those unfamiliar, briefly it works like this…
When a claim is made upon the policy, because the insured has had an accident or otherwise needs legal assistance, insurers appoint one of their “panel lawyers”. They will tell you that these lawyers are carefully selected to be on insurers’ exclusive panels, rigorously audited etc.
They won’t tell you that the defining feature is agreement in return for a steady flow of work to perform it at much lower prices than most other solicitors, not blessed (?) with the same arrangement, are prepared to charge for their work.
But a European Directive going back as far as 1987, and subsequent Regulations and decisions say that freedom of choice of solicitor cannot be restricted. BTE insurers have long argued various ways around this, because it’s not commercially attractive for them to have to deal with and pay anybody but their tame panel lawyers.
The simple answer to most of their woes has been to meet requests from policyholders to appoint their own chosen lawyers with something in the vein, “sure, as long as your lawyers are prepared to agree our terms”. Seems fair enough? The problem is – as described above – that insurers then refuse to pay any more than they would pay one of their panel members.
So, in this case, when the policyholders wanted to instruct a non-panel firm, insurers’ response was to refuse the appointment because that firm was not prepared to work at the very low rates that panel lawyers accept.
(Incidentally, if you wonder how they can safely do it then it will help to reflect on what we have seen recently in the way of an increase in professional negligence claims – see Peanuts, Panel Beater and Solicitors Journal 23 October 2012.)
The Court of Appeal disapproved, finding that:-
“ It must be right that a refusal to accept the appointment of an insured’s lawyer of choice on the basis that he will only be accepted if he charges no more than the non- panel rates would be a serious inhibition of freedom of choice and thus contrary to the Regulations.”
Some comfort for the insurers in the finding that there may be circumstances in which the insurers were obliged to pay only the “non-panel rates” stated in the standard terms and conditions and that would be so in this case.
There is an important point to note for the personal injury claimant industry generally at Paragraph 29 of the judgment. The court observed that:-
“We were not directed to any evidence before the judge that solicitors (other than Webster Dixon) were not prepared to conduct the cases of the insured for the non-panel rates of £125 (rising to £139) per hour. In the absence of such evidence it does not seem to me to be possible to say that the insurers cannot rely on their terms of their contract restricting the insured’s indemnity to the non-panel rate. It is not enough merely to point to rates set out in the HM Courts and Tribunal Service Publication “Guideline Rates for Summary Assessment”.
United we stand? This may not go very far unless the general public, particularly drivers, are informed and educated about the binding nature of terms and conditions which, when they take out the policy, they will never even have seen.
But as the court’s conclusion indicated, it’s a long overdue clip round the ear which may pile on the pressure now for BTE insurers. As for other concerns, you will have to read my article in the current issue of Personal Injury Brief Update Law Journal!
Obiter, in the context of this post, I noticed his Lordship’s statement that “the court’s duty is to decide the parties’ legal rights, whatever the distaste with which it views the behaviour of the parties in the lead up to the hearing.” Too true, and possibly one to remember during the whiplash debate over the days and weeks to come.