What is Legal Expenses Insurance?

It is not uncommon for people to have legal expenses insurance either as a stand alone policy or more commonly as an extension to a motor insurance policy, a home buildings and/or contents policy or a professional or trade indemnity policy. If you have insurance of this nature, your legal expenses insurers may agree to meet our fees and expenses and those of the Defendants up to an indemnity limit, which is usually £10,000, £25,000 or £50,000.


You should therefore check all of your existing household, buildings, contents, motor and other insurance policies (and those of your immediate family who are living with you) because it often happens that our clients do not realise that they have this insurance cover until we suggest that they check. Please then bring them all to your initial meeting with us so that we can check whether or not any of them include legal expenses insurance cover and, if so, whether that cover will be appropriate and sufficient for your claim. It is important that we make this check for you at the outset because the law does not permit us to apply for legal aid or offer you a conditional fee agreement until we have done so.


If you have a legal expenses insurance policy, the insurance company will cover both your own legal costs and those of your opponent. However, there are a number of restrictions and other disadvantages with these policies that you need to be aware of, because they may mean that this will not necessarily be the most appropriate way for you to fund your claim.


Restrictions and disadvantages


(i) Cover limitations

First, whatever form of funding you choose, you need to be sure from the start that you have sufficient funding to take the claim through to a full court hearing if necessary. Sometimes, this can be a problem when relying on legal expenses insurance funding alone because these policies were not designed to fund medical negligence cases. Rather, they are really intended to cover more straightforward personal injury and non-accident claims. Because of this they always have an “indemnity limit”, which stipulates the maximum sum that the insurers will be willing to pay out under the policy.


Although different policies have different indemnity limits, we are not aware of any policy that provides an indemnity limit in excess of £50,000. That is insufficient to take a medical negligence case to a full court hearing because the total of both your own legal costs and those of your opponent if the claim is lost, could easily be £130,000 or even more. Therefore, if a medical negligence claim is pursued relying on legal expenses insurance funding, the solicitor will have to arrange some other form of “top up” funding in the event that the Defendants resist the claim and it becomes necessary to take it to a court hearing.


The problem with this is that it may not then be possible to arrange alternative funding at that late stage. For example, even if the solicitor is willing to switch to a conditional fee arrangement (and not all solicitors will be willing to do so) there is no certainty that an insurance company will be willing to support it with insurance cover. This is not a theoretical possibility but something that actually happens. Unfortunately, when it does happen, the client is forced to abandon the claim even though it may still have the support of medical experts and the client’s solicitor and barrister still believe that it can succeed.


(ii) Controlling how the claim is pursued

Another disadvantage of using legal expenses insurance is that the insurer will wish to control the way in which the claim is investigated and pursued. For example, permission will have to be obtained before the insurance company will agree to the solicitor instructing experts and they sometimes restrict the number and type of experts that can be used. This is because the insurers want to limit their financial outlay as much as possible.

The insurance company will also retain the right to withdraw cover at any time if they form their own opinion that the claim no longer has reasonable prospects of success. They can take this view and withdraw cover even though the client may want to continue with the claim and the solicitor, barrister and medical experts all still believe that it may succeed.


(iii) Ensuring Independence

There are concerns that the use of these policies can jeopardise the independence of the solicitor and create conflicts of interest between the solicitor and the client. Legal expenses insurers have panels of solicitors firms who they encourage clients to use. In fact they often try to insist that the client uses a solicitor from their panel rather than a solicitor of the client’s own choice, although there is some uncertainty as to whether they have the legal right to do that.


Many people assume that the insurance companies appoint solicitors to their panel because of the quality of their work. This is not the case – they often choose solicitors with whom they have negotiated low rates of pay so that they can save money. This means that the insurer chooses the solicitors who will give them the best financial deal rather than the solicitors with the highest quality standards. For this reason you should never use a legal expenses insurance policy to fund your claim unless the insurance company gives you a free choice of solicitor.


Even if the insurance company will let you use a solicitor of your choice, there may still be a potential conflict of interest between your own interests and those of the solicitor if the solicitor has an ongoing relationship with that insurance company under which they send them new clients. This is because the solicitor will not want to upset the insurers and jeopardise that relationship. Under Solicitors Regulation Authority rules you are entitled to know if your solicitor has any sort of relationship with the insurer who is funding your claim and you should therefore ask the solicitors if they ever have work of any description (not just medical negligence cases) referred to them by that insurer.


We value our independence and are not willing to risk compromising it by accepting cases that are referred to us by an insurance company. We are most certainly not willing to permit any insurance company to tell us how we should run our cases for our clients and therefore we do not accept clients or cases that are referred to us by any insurance company.

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