ARAG UK Policyholders are guaranteed fair treatment when they have the right to choose a lawyer to represent them in proceedings.

 The European Court published its decision on 7th November in the case reported on as “The Sneller Case”. This concerned the “free choice of lawyer” in legal protection insurance.

 While some commentators have given the impression that the outcome of the Sneller case is somehow controversial and likely to cause UK insurers to change their position with regard to freedom of choice that isn’t the case for ARAG policyholders who have long since been permitted and always will be able to exercise their legal right to choose. In case you need a refresher here is the back ground to the case.

 Background to Sneller

 The case was referred to the EU Court consequent to a request by the Dutch Supreme Court in proceedings between Mr Sneller and DAS Nederlandse Rechtsbijstand Verzekeringsmaatschappij NV (‘DAS’), seeking clarification on how the EU Directive 87/344 (which regulates freedom of choice in legal expenses contracts and is transposed into national law in the UK by the Insurance Companies (Legal Expenses Insurance Regulations) 1990) should be interpreted.

Mr Sneller was a policyholder of DAS in the Netherlands who wished to use his own lawyer for an employment claim. DAS required Mr Sneller to use its own in-house lawyer on the basis that it is not mandatory to engage a registered lawyer to represent claimants in employment disputes in the Netherlands and the insurance contract limited freedom of choice to cases where a claim must be delegated to external counsel or where in DAS’s opinion it was necessary to instruct an external lawyer.

Mr Sneller argued that if judicial or administrative proceedings are brought, the contract terms must always offer the insured person the right freely to choose his legal representative.

The EU Court judgment

The first two rounds went to DAS, but the European Court agreed with Mr Sneller and ruled that EU law on freedom of choice prevents a legal expenses insurer, which stipulates in its insurance contracts that legal assistance will be provided by its employees, from also providing that the costs of legal assistance provided by a lawyer or legal representative chosen freely by the insured person will be covered only if the insurer takes the view that the handling of the case must be subcontracted to an external lawyer.

 Secondly the EU Court said that this limitation on the rights of legal expenses insurers would apply irrespective of whether or not legal assistance is compulsory under national law in the inquiry or proceedings concerned.

According to this judgment, DAS had restricted the insured’s freedom to choose a lawyer for legal assistance in a non-acceptable way, by reserving the right to decide whether an external lawyer is necessary or not to handle the particular case.

 Regarding the cost impact of this decision (particularly for those legal protection insurers who provide a large part of their legal assistance through their employees) the European Court has explained that the premium might be adjusted or costs payable by the insurer may be limited. In order to guarantee a free choice of lawyer it is not necessary to cover all costs borne by the insured, as long as that freedom is not rendered meaningless.

For detailed information here is a link to the EU judgment.
 http://curia.europa.eu/juris/document/document.jsf?text=&docid=144208&pageIndex=0&doclang=EN&mode=req&dir=&occ=first&part=1&cid=509849

 ARAG UK’s position
ARAG UK does not use in-house lawyers to represent claimants. We work with a nation-wide panel of firms that consistently deliver superior levels of customer service that we insist on and have appropriate expertise in the areas of law covered by our policies.

When it becomes necessary to issue proceedings our policyholders can choose their own solicitor if they wish but will be responsible for excessive costs where a firm will not agree to work according to our terms of business which allow for reasonable and proportionate costs. This is also true for applicant employment tribunal cases despite the fact that in common with the Netherlands it is not compulsory for representation to be provided by a qualified lawyer. Freedom of choice does not engage where an insurer covers damages or compensation – as in the case of employment compensation awards cover. 93% of ARAG claimants benefit by having their claim handled by a panel firm

If in the future we were to engage in-house lawyers we recognise that freedom of choice is triggered at the point it becomes necessary to issue proceedings and any such developments would be implemented on that basis.

Howell’s School could have been saved with legal insurance

The closure of Howell’s School in Denbighshire was possibly avoidable had the school in place adequate insurance arrangements against employment claims.

The school, which had a loss of £162,733 in its accounts filed in August 2012, had lost a case for unfair dismissal in which a teacher was awarded £38,000. The compensation is still unpaid. The finances are further complicated by another claim for unfair dismissal for a case lost in March this year against the former head teacher and his partner, who was head of PE and pastoral care in which compensation is still to be agreed.

Legal insurance is widely available to cover such disputes, paying both the legal costs to represent the employer, in this instance the school, and paying the awarded compensation to the ex-employees.

The closure of the school that had been at the heart of the community for more than 150 years is a catastrophe, particularly for the pupils and parents who have very little time to find a new school before the new term in September.  The closure will be even more difficult to accept by pupils and parents in knowing that had the school taking out appropriate legal insurance then some of the financial burden could have been removed, possibly leaving the school to serve the community for years to come.

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Transport Select Committee Delivers a Refreshingly Balanced Report

The Transport Select Committee’s (TSC) third report on the cost of motor insurance focuses on the impact of whiplash claims on premiums. The report provides recommendations to the Ministry of Justice after considering evidence from a wide range of interests. ARAG admires the thorough approach of the TSC and endorses many of the report findings. Provided that the Government responds positively, the recommendations should ensure that individuals who have suffered an injury, including whiplash, as a result of a motor accident which was not their fault, will retain access to justice through the small claims procedure.

The UK is not the Whiplash capital of the world

The TSC considered medical evidence about the characteristics and effect of whiplash injuries, accreditation of medical experts, the volume of claims and to what extent whiplash claims are exaggerated or fraudulent. They concluded that 58% of traffic accidents result in whiplash injuries, affecting nearly 477,000 individuals in the last year.  This number represents the lowest number since at least 2007-8. The TSC urged the Government to analyse earlier accident statistics and the ABI to provide better data. The committee was not persuaded that the Government’s claim about the UK being the “whiplash capital of the world” could be established from evidence available.

The report expressed surprise that the Government had brought forward measures to reduce fraudulent or exaggerated whiplash claims without having even an estimate of the scale of the problem. ARAG has offices in 15 countries and our evidence supported the TSC’s view. Maybe the Government’s position would have been different had representatives from the legal profession been invited to the PM’s exclusive summit with motor insurers which took place on 14^th February? The TSC was disappointed to hear about lack of engagement with the legal profession.

Medical Reports

The Committee supported Government proposals for accreditation of medical practitioners (including physiotherapists) and suggested that the Government consider a random audit of medical reports. The Committee felt, that claimants should show some additional evidence to support their claim, whether from a visit to the GP or A&E soon after the accident, or evidence of the impact of the injury on their life. As ARAG deplores exaggerated and fraudulent claims we believe this to be perfectly reasonable.

Reducing the limitation period

As injury symptoms emerge relatively quickly the Committee recommended the Government explain why they were unresponsive to changing the limitation period for road traffic claims below £10,000 from three years to one.

The small claims threshold

ARAG provided comprehensive statements about the negative impact that increasing the small claims track threshold to £5,000 is likely to have on access to justice for motor accident victims. We realise that least well off drivers can be tempted to decline BTE legal expenses cover in order to reduce their premium. The committee was impressed by our argument that expecting individuals to have the capacity, confidence or appetite to instigate claims through the portal is unrealistic. They believed “that access to justice is likely to be impaired, particularly for people who do not feel confident to represent themselves in what will seem to some to be a complex and intimidating process”. They further noted that “insurers will use legal professionals to contest claim, which will add to this problem”.

Our evidence also raised concern about small claims track procedures having the potential to increase the risk of fraud. The TSC noted that procedural implications “could prove counter-productive in efforts to discourage fraudulent and exaggerated claims.” 

The committee recommended no change to the small claims threshold until the MOJ had assessed the impact of the Portal.

In conclusion

The TSC asserted that genuine claimants should not be demonised. Again the Committee expressed surprise that the Government had only listened to the insurers’ perspective and found this disappointing in the light of the Government’s own view that the insurers had encouraged unnecessary and excessive claims with their own business models. Insurers were further criticised for making offers in advance of receiving a medical report and for settling claims where fraud or exaggeration was suspected.

The TSC recommended that the Government explain how it will monitor whether or not motor insurers honour their commitment to ensure savings that result from legal reforms are passed through to consumers in the form of lower premiums. Fully recognising the dysfunctional and opaque nature of the motor insurance market the Committee called on insurers to be more transparent about financial and other links in the service chain.

It seems to us that after not being listened to for so long, and even worse being “blamed” for mischiefs in the legal system, the position of claimants has at last been appreciated. We are delighted to see that our submission to the TSC has influenced their report. In particular retaining the small claims threshold at £1,000 will ensure ATE remains a possibility for claimants who have not taken out BTE legal expenses.

 

 

 

ARAG ATE policy safeguards claimant

On the 18th January 2013, the High Court overturned an earlier judgment that an ARAG ATE policy was not good enough security for costs.

The bespoke wording expressly stated that the policy would only be void should there be fraudulent non-disclosure (and not for innocent or negligent non-disclosure), and even if there was, the cancellation provisions expressly stated that ARAG would be liable for costs up to the date of cancellation, so minimising any risk to the defendants costs.

The case was not the type to have an adverse verdict at trial, as it centred on technical issues rather than contentious facts, and so there was no commercial reason why the claimant would wish to jeopardise the policy by not complying with its terms. Quite simply, the policy was for the claimant’s own protection.

This case clearly shows that defendants will use the ATE policy as a way of making life difficult for the claimant, but fortunately in this case, the claimant had an ARAG policy that provided the safeguard for the claimant should they lose, and likewise for the defendant.

Permission to appeal has not been granted as yet, and the claimant was awarded the costs of the application.

Big news for small businesses

The banking world has been in the dog house for a while now but a new initiative from the Financial Services Authority (FSA) looks to keep them there for a bit longer. Another mis-selling scandal has emerged in relation to the sale of interest rate swap products to small businesses.

According to an article in the Independent interest rate swaps are “complicated derivatives that have been sold as protection - or to act as a hedge - against a rise in interest rates”. The FSA have identified that more than 90% of the products were mis-sold to the small business sector accumulating to an estimated “total [of] as much as £1.5 billion across the sector”.

As a result of the mis-sold product many small businesses are left with hefty bills, however the FSA has set out a framework for the banks to provide compensation. As quoted in the Telegraph, Vince Cable sets out that “the immediate priority is to ensure small businesses are not driven out of business by banks pursuing liabilities for swaps that they mis-sold”.

With this in mind, ARAG can provide your small business customers with the means to pursue the compensation that they are entitled to with the support of Recourse After-the-Event insurance.