Employment litigation is expensive, but legal expenses insurance can be used to fund employment litigation. So if a person has legal expenses insurance, apart from a £50-£100 policy excess, the policy will cover the legal fees and expenses an insured incurs in employment litigation. It depends on the policy wording but the standard industry cover is £50,000.00.
Legal expenses insurance for employment disputes is offered with almost all private insurance policies including household, buildings and contents insurance. It is also offered with some motor insurance policies, pet insurance and travel insurance policies and banks and building societies also offer legal expenses insurance cover with some accounts or as part of a mortgage package. As most people have one or more of the insurance policies listed above, a lot of individuals will have legal expenses insurance that will cover the cost of employment litigation.
Freedom to choose a lawyer
Some legal expenses insurance companies, to keep costs down, use “panel solicitors”. Panel solicitors charge the insurance company a reduced fees rate because they get bulk work from the insurance company.
However, to reflect these reduced fees rates and to make a profit some panel solicitors staff their employment litigation teams with junior lawyers or paralegals who are unqualified lawyers. These persons are required to be supervised by a qualified lawyer.
This means that the quality of advice and the quality of service that an insured gets from panel solicitors is sometimes poor.
The Insurance Companies (Legal Expenses Insurance) Regulations 1990 (the Regs.) state that an insured has the freedom to choose a solicitor under a legal expenses insurance policy. However some legal expenses insurance companies have ignored these Regs. and when an insured asked to use a particular solicitor it was argued by the insurers that under the terms of the insurance policy the insured was only entitled to use panel solicitors.
A recent decision of the European Court of Justice (“ECJ”) has held that any provision of an insurance contract that detracts from, or qualifies in any way, the freedom to choose a lawyer is not compliant with the Legal Expenses Insurance Directive. (This Directive was implemented in the UK by the Regs. referred to above).
As a result of this ECJ decision the Financial Services Authority (FSA) wrote to all insurers advising them that if their insurance contract terms detract from or qualify in any way the freedom of an insured to choose a lawyer they will be in breach of the Regs. and the Directive.
This reinforces the principle that an insured has the right to instruct a solicitor of his/her choice and does not have to use the insurers “panel solicitors”. There is some doubt about when that right kicks in and some insurers argue that the right to choose a solicitor does not arise until proceedings have commenced.
At worst an insured might have to use the insurance company’s panel solicitors at the beginning of a claim but once the Tribunal Claim Form has been lodged with the Tribunal the insured is entitled under the Regs. to insist that the case is transferred to a solicitor of his or her choice.
Everyone should check their insurance policies (especially the ones outlined above) to ascertain if they have the benefit of legal expenses insurance.
An employee in dispute with an employer should ask the insurer to appoint a solicitor of their choosing to deal with the case from the outset. Many of the better insurance companies will allow this as standard. If the insurance company refuses to appoint a solicitor of choice from the outset the employee has the right to appoint the solicitor of their choice once the claim form has been issued.
For persons requiring further information about this please go to www.financial-ombudsman.org.uk/publications/technical_notes/legal-expenses
