ombudsman news gives general information on the position at the date of publication. It is not a definitive statement of the law, our approach or our procedure.
The illustrative case studies are based broadly on real-life cases, but are not precedents. Individual cases are decided on their own facts.
One of the most common complaints about legal expenses insurance concerns who chooses the policyholder’s legal representatives. Both parties feel strongly about this. Insurers consider that their panel of solicitors has the relevant expertise to deal with any type of legal proceedings, and that these solicitors’ costs are properly controlled. Policyholders take the view that only someone they have chosen will represent their interests vigorously and impartially. In many cases, they are unsure whether a solicitor chosen by the insurer will represent their interests, or the insurer’s. And they frequently complain that the firm of solicitors chosen by the insurer is in a less convenient location than their preferred firm. The fact that both parties may be giving instructions to the same solicitors only complicates matters.
The Insurance Companies (Legal Expenses Insurance) Regulations 1990 gives policyholders the right to choose a lawyer. However, they can only exercise this right after administrative or legal proceedings have started. The effect of this qualification is to dilute the policyholders’ right. Policyholders may – with some justification – feel reluctant to exercise their right when it means they will be appointing solicitors to take over mid-stream. Indeed, they may not always be able to afford to choose new solicitors. This is because some insurers require policyholders to meet the new solicitors’ costs for updating themselves with the work done by the previous firm.
The converse also gives rise to disputes. Where policyholders have paid for legal advice before notifying the insurer of a claim, they will not unnaturally wish that same firm to continue with their case. However, their insurer may prefer to insist that a solicitor from its own panel takes over the action. We do not always support insurers in this position, despite the fact that, legally, they are entitled to make a new appointment. This is for two reasons. First, the current firm will already be familiar with progress to date and appointing a new firm will require duplication of effort and expense. Second, the replacement of the original firm may only be temporary, since it is highly likely the policyholder will insist on returning the case to them as soon as possible.
We consider that insurers should take a pragmatic approach. Where one firm is already familiar with all the background and is dealing satisfactorily with the case, it will generally not be sensible for the insurer to involve another firm unless, for example, the new firm has superior expertise. Otherwise, insurers risk alienating their policyholders to little or no advantage.