Published: 31 March 1999
Choose the Lawyers You Want!
When an accident at work happens, specialist legal advisers are needed straight away to provide assistance in dealing with any investigations undertaken by the police and the HSE. When notification of the accident is made to the insurers, they will often resist attempts by the policyholder to choose its own lawyer and insist that in order for the policyholder to gain the benefit of the legal expenses insurance policy, the legal adviser must be the insurer’s own panel lawyers otherwise insurance cover will be refused.
Why freedom of choice is important?
A potential conflict of interest can arise between the different interests of an insurer and the policyholder in both civil and criminal matters.
In criminal matters (such as health and safety prosecutions) the insurer may be responsible for paying the insured’s legal fees, but it will not be responsible for paying either the prosecution costs awarded by the court or any fine imposed. Hence, there is no commercial incentive for the insurer to encourage spending on specialist lawyers in an effort to reduce the level of fine or damage to the insured’s reputation. The policyholder’s reputation may therefore not be protected by this approach, and in addition they may not be given specialist advice on how to prevent similar occurrences in the future by a panel lawyer.
A policyholder does not have to accept this position.
“It has always been the fundamental right of every citizen to be represented by solicitors of his or her choice” [Maltez . Lewis (1999)].
The Insurance Companies (Legal Expenses Insurance) Regulations 1990 (‘the Regulations’) also provide a policyholder with the authority to choose who it wishes to instruct as its lawyer.
Regulation 6 states that:
(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 interest arises
(3) The above rights shall be expressly recognised in the policy.
Although there may be no question that a panel lawyer is capable of representing the insured in many circumstances, the position is clear: where an insurance company provides general insurance and legal expenses insurance, then it must also provide the freedom for the policyholder to choose its own lawyer.
This becomes even more significant where a significant amount of work has already been undertaken in investigating the background to the matter (or in taking steps to avoid a prosecution) prior to the insurer considering whether it wishes to engage a panel lawyer’s services. There will be no conflict of interest between the policyholder and the insurer if the policyholder’s own lawyers are retained. In addition such independent lawyers will normally have the requisite expertise and knowledge of the issues and the policyholder’s business. It would clearly be inappropriate to instruct lawyers from an insurer’s own pre-selected panel after investigations had begun, and it would be generally advisable therefore for insurers to agree to the appointment of the policyholder’s choice of lawyer.
The Financial Ombudsman Service has confirmed the above points and also recommended that it is appropriate to use the policyholder’s own solicitor in any cases where there is a suggestion of a conflict of interest, or in large and complex matters; if therefore an insurer insists on a panel lawyer, the policyholder may be able to refer the matter to the Financial Ombudsman Service.
Alternatively, policyholders with a large influence over insurers can of course “vote with their feet” and insist on selecting their own legal advisers failing which insurance cover will be bought elsewhere. The message to policyholders is therefore clear – do not be afraid to exercise your freedom of choice!
For further information on this issue or any other legal licensing problems contact associate Hannah Price on 0115 953 8500.
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