Overview by Vikki Weinrich-Cooke

This case involved issues relating to a Claimant’s freedom to instruct a solicitor of his own choosing as provided for under EU Directive and Statute.

The circumstances at first instance related to the Appellants’ restriction of freedom of choice as prescribed by Statute. The Appellants had the benefit of Legal Expenses insurance. Under the panel terms and conditions the insurer appointed McKeowns Solicitors. However, the individual fee earners responsible for conduct moved to Webster Dixon Solicitors and the Appellant’s indicated a wish to continue to retain their services at the new London based firm. The Appellant’s made a case that the insurer should be responsible for the fees incurred by Webster Dixon but it had been laid out that the insurer’s system required that any non-panel firm had to agree to the non-panel terms (which included hourly rates of £125.00 increasing to £139.00 per hour).

At first instance the insurer denied that the Appellants were not indemnified purely on the basis that the non-panel firm chosen would not accept the non-panel rate. In addition, it was denied that the only costs that could be recovered would be at the non-panel rate. Instead it was submitted that the non-panel rate should be the starting point for assessment. However, the Judge considered that the non-panel rate was more a comparator for assessment of the costs alongside the notion of the availability of other firms of solicitors able to take on the litigation who may charge at a lesser rate.

Emphasis was put on the insurer’s apparent disregard for the EU Directives and obligations to protect the Appellants’ freedom of choice. The terms in the policy appeared to restrict these freedoms with onerous clauses allowing the insurer refuse the Claimant’s choice of solicitor “in exceptional circumstances”; the term itself not having been properly defined. The impression that Webster Dixon would not even be entitled to costs under the non-panel terms was also later disclaimed by the insurer. Further complications arose when the insurer chose to revert to the previous standpoint that the non-panel firm should indeed be restricted to the non-panel hourly rate.

The court considered that the questions before it concerned whether it was possible to construe the terms of the policy in line with Statute and also, whether the relevant terms inhibited the freedom of choice so as to prevent the insurers’ reliance on those terms.

Discussions over certain of the terms of the policy took place and the unrefined term “exceptional circumstances” used to reserve the insurer’s position to refuse the Appellants’ chosen representative was considered to be in contravention of the Regulations.

It was decided that reference to the standard terms of appointment was considered enough to make them part of the contract with the Appellants, and therefore, bound by those non-panel rates. However, it was considered contrary to Regulation for the insurer to retain such a broad right to refuse the Appellants’ choice of representative purely because acceptance would only be granted if that firm charged only the non-panel rates. The insurers made this concession at hearing.

It was considered that the terms read as a whole were clear as to what was covered and what was excluded and the entitlement to recover the non-panel rate was clear. It was open to the Appellants to recover in excess of these rates and if that meant paying more to their chosen solicitor it was a decision they were still free to make. When considering whether this extra financial burden could also be defined as “inhibiting” the Appellants’ freedom of choice, the notion was declined. The Regulations could not be interpreted in such a way as to obligate insurers to pay costs in any amount due to an unfettered freedom of choice.

The appeal concluded and the order was set aside allowing the Appellants to recover no more than the appropriate non-panel rates. Of further note was the comment regarding the non-compliant clauses contained in the policy terms which were deeply frowned upon and ordered to be re-drafted or deleted.

Non-panel practitioners may therefore wish to take extra care to investigate the panel rates available and provide for any difference in hourly rate they wish to seek by informing the Claimant of the same. The case does demonstrate that costs should remain payable at a certain level (albeit rather low in most cases) and insurers should not be able to rely on onerous or undefined clauses that are considered to inhibit the Claimant’s freedom of choice.