Last year the European Court of Justice (ECJ) opened the debate on whether claimants who are pursuing a claim under a class action are entitled to choose their own lawyer to represent them when they are covered by legal expenses insurance.
The issue was determined by the ECJ (Case C-199/08, Eschig) when the court was asked to decide whether ¬insurers were able to rely on a provision in a policy that restricted the insured’s choice of lawyer if the claim was a ‘mass claim’. Austrian Erhard Eschig’s claim was one of several thousand for money lost when an investment turned sour. Others also had LEI from the same insurer, Uniqa. Having received the claim, Uniqa refused cover, on the grounds that the lawyers had to be panel members.
Uniqa tried to enforce a clause" in their policy which allowed them to select the legal team when several insured parties in similar situations wished to pursue claims against the same opposing party. The Insurers sought to combine the legal representation of their clients’ interests in order manage and bundle similar cases. They argued that selecting specialised lawyers, allowed them to optimise the professional competence to best defend clients’ interest and that this was beneficial to claimants.
Not withstanding the arguments over what was best for the claimants the court correctly ruled against the Austrian insurers holding that "mass claims clause "was unenforceable since it breached policyholders' rights to instruct a lawyer of their own choosing to represent them in a claim under a legal protection policy. These rights are provided for by European Council Directive (87/344/EEC 1987) which is implemented in the UK by The Insurance Companies (Legal Expenses Insurance) Regulations 1990. (1990 LEI Regs)
The prime concern of the legislation is to protect the insured parties and prevent conflicts of interests between them and the insurance company. Both the EU Directive and the UK the 1990 (LEI) Regs provide three alternative options which are open to LEI providers to avoid conflicts of interests with claimants.
The solution favoured by bodies such as the Law Society is that freedom of choice should prevail from the moment a claim is intimated to the insurer. However, the option adopted by the UK LEI market is that freedom of choice should be available to claimants where under a legal expenses insurance policy recourse is had to a lawyer to defend or represent the insured in any inquiry or proceedings.
UK Legal Expenses insurers usually exercise their right to appoint a panel firm to undertake investigations into the merits of a claim, to negotiate on behalf of Insureds and to undertake preliminary work until it is necessary to issue court proceedings.
While ARAG is keen to pass on as many cases as possible to their panel members we do see that for the insured client this can cause inconvenience and takes a flexible approach to changes that may be enforced in the future.
ARAG is keen to hear the views of the wider LI community on the subject.
For further information contact the ARAG press office on email@example.com
or 0117 917 1568.