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Freedom of Choice The Right to Choose Your Own Solicitor

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Legal Expense Insurance (LEI) is a relatively inexpensive way for a construction, engineering or manufacturing organisation to insure against the cost of defending a legal action.  In an increasingly litigious society, LEI provides a safety net for companies against huge legal expenses.

Most insurance companies providing LEI offer a panel of solicitors that are highly-qualified and experienced.  However, many organisations are unaware that UK and EU legislation and case law provides that a person or company is free to choose their own solicitor, outside of the insurance company’s panel.

This is important for a number of reasons.  You may have instructed a specialist law firm in the past and been happy with their service and level of expertise.  It would be unfair to prevent a company from re-engaging their firm of choice simply because they had the foresight to obtain LEI.  Also smaller, boutique law firms often have the flexibility to provide a swift emergency response and bespoke solutions when it comes to negotiating settlement - a feature that is sometimes lacking in the larger firms due to their overheads and internal red-tape.

The decision of Sneller v DAS Nederlandse Rechtsbijstand Verzekeringsmaatschappij

In 2013, the European Court of Justice (ECJ) in Sneller v DAS Nederlandse Rechtsbijstand Verzekeringsmaatschappij NV:C-442/12 [2013] All ER (D) 101 (Nov) provided guidance on Council Directive 87/344/EEC, art 4(1) which is set out in its entirety below:

Article 4

1. Any contract of legal expenses insurance shall expressly recognize that:

(a) where recourse is had to a lawyer or other person appropriately qualified according to national law in order to defend, represent or serve the interests of the insured person in any inquiry or proceedings, that insured person shall be free to choose such lawyer or other person;

(b) the insured person shall be free to choose a lawyer or, if he so prefers and to the extent that national law so permits, any other appropriately qualified person, to serve his interests whenever a conflict of interests arises.

The two questions before the court were effectively:

  • Whether art 4(1) entitles an insurer, which defines in its policy that it has its own panel of solicitors, to indemnify the costs of external legal advisors freely chosen by the insured only in cases where that insurer takes the view that the case must be assigned to an external lawyer?          

  • Whether the answer to that question will differ, depending on whether or not legal assistance is compulsory in the inquiry or proceedings concerned?

In this case, Mr Sneller was bringing a claim against his former employer for unfair dismissal. Legal assistance is not compulsory for such claims in the Netherlands.

Mr Sneller wanted to appoint his own lawyer under his LEI cover with DAS (the insurer). However, the insurer was only prepared to allow him representation from one of its (non-qualified) employees. Following an adverse decision against Mr Sneller in the Dutch Court of Appeal, the issue was referred to the ECJ because of the wider social implications relating to the freedom of choice of legal representation.

The Court ruled that art 4(1)(a) cannot be interpreted in such a way as to allow any insurer who stipulates in its LEI policies that legal assistance will principally be provided by its own employees or insurance legal panel, to restrict indemnity for costs incurred by the insured if they use their own lawyer solely to those circumstances in which that insurer considers the handling of the case must be subcontracted to an external lawyer.

The Court also confirmed that the insured’s right to choose their own lawyer will not differ depending on whether or not legal assistance is compulsory under national law in the particular proceedings concerned.

The significance of the case is that it provides further confirmation that the freedom to choose one’s own lawyer cannot be inhibited by LEI providers.

The UK Position

The Insurance Companies (Legal Expenses Insurance) Regulations 1990, regulation 2 defines “legal expenses insurance business” as the business of effecting or carrying out contracts of insurance (other than contracts of reinsurance) which insure against a risk arising from legal expense. 

Thus, any insurance policy such as an employers’ liability policy or public liability policy that provides cover for legal expenses comes within the 1990 Regulations.

Regulation 6 of the Insurance Companies (Legal Expenses Insurance) Regulations 1990 states:

Freedom To Choose Lawyer

6.—(1) Where under a legal expenses insurance contract recourse is had to a lawyer (or other person having such qualifications as may be necessary) to defend, represent or serve the interests of the insured in any inquiry or proceedings, the insured shall be free to choose that lawyer (or other person).

(2) The insured shall also be free to choose a lawyer (or other person having such qualifications as may be necessary) to serve his interests whenever a conflict of interests arises.

(3) The above rights shall be expressly recognised in the policy.

 The UK Court of Appeal  was called on to interpret how the EEC Directive related to LEI in the case of Brown-Quinn v Equity Syndicate Management Ltd  [2012] EWCA Civ 1633, [2013] 3 All ER 505.

 

This case concerned the question of whether an insurer’s refusal to accept the insured’s choice of solicitor where their fees exceeded the insurer’s prescribed rates restricted the insured’s choice of legal representative and was consequently in breach of Regulation 6.

 

The Court of Appeal held that the insurer was not entitled to deny the respondent the benefit of her LEI.  European Law clearly establishes the right of an insured party to choose their own solicitor.

 

Cases Decided After Sneller

There have been two subsequent decisions by the ECJ following on from Sneller.

 In both Massar v DAS Nederlandse Rechtsbijstand Verzekeringsmaatschappij NV (Case C-460/14) and in Buyuktupi v Achmea Schadeverzekeringen NV and Stichting Achmea Rechtsbijstand (Case C-5/15) the Court found in favour of the insured party.  In both cases, the Judges refused to interpret Article 4 narrowly and emphasised the ‘obligatory nature’ of an insured party’s right to choose their own legal representative.

 

These cases are consistent with previous rulings which uphold the rights of an insured party to choose a legal firm from outside the insurer’s panel.

 

Companies holding an LEI policy should feel increasingly confident that they can instruct a solicitor of their choice in the event they are required to defend themselves in a legal case, if that is their preference.

 

Fisher Scoggins Waters are a London based law firm who specialise in construction, manufacturing and engineering law.  If you would like more information about any points raised in this blog, please phone us on 0207 993 6960.

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