The Court of Appeal is to decide the extent to which legal expenses insurers can control how much they pay non-panel solicitors.
ULR Additions has lodged an appeal against the important ruling of Mr Justice Burton in October that before-the-event (BTE) insurers cannot reject a policyholder’s choice of a non-panel solicitor because the lawyer will not accept payment on their rates.
The company, which until December 31 2009 administered LEI policies on behalf of Equity Red Star, said it was taking the case to the Court of Appeal on the grounds that any attempt to control solicitors’ remuneration rates payable by a legal expenses policy does not represent a barrier to the claimant’s freedom of choice.
No date for the appeal has been set yet.
Managing director Robert Kay said: “This case is not about freedom of choice; it is about providing solicitors with a reasonable rate of return. We have always been content to allow a client to choose their own solicitor, but in this instance the costs in question were those of a fee-earner who had left one firm within our panel of solicitors to join Webster Dixon and consequently transferring those claims to their new employer. The increased fees for that work, at £274 per hour were, we argued, unreasonable.”
Mr Kay said the European Court of Justice ruling in Stark found that a legal expenses insurer is able to assert a rate of remuneration “so long as such rate would not render de facto impossible a reasonable choice of representative by the insured”.
He continued: “We can if necessary go further by pointing out how the ECJ’s decision in Stark clarified that a rate is reasonable as long as it enables the purchase of legal services across a spectrum of local solicitors.”
The insurer said the appeal was particularly important given the emphasis the government has placed on establishing a strong BTE market in the wake of the legal aid cuts and Jackson reforms. “A system that enables legal services to be bought by LEI companies at reasonable cost is essential so that premiums can remain affordable,” Mr Kay said.
In the three test cases of Webster Dixon v Equity Syndicate Management & ACM ULR Ltd  EWHC 2661 (Comm), the prescribed rates were £125 and £139 (depending on the insurer); London firm Webster Dixon put forward hourly rates for a partner or associate (grade A/B) of £274, for a solicitor £210 and for a trainee solicitor £105.
After concessions during the trial, the insurers’ argument focused on the contention that, on assessment, their prescribed fees should be the starting point in deciding what is reasonable.
However, the judge decided that insurers’ rates can only be used as a “comparator”. He said: “I suspect that in this case, where the insured made a choice of specialist solicitors, in London, fully qualified to meet the difficult issues in dispute with substantial defendants, an assessment would be likely to treat such comparator as of less weight.”