LEI panels dispute could reach courts

Claimant personal injury lawyers are set to turn to the courts in an effort to force legal expenses insurers to drop law firm panels after a major policy statement from the Financial Ombudsman Service supported their use.

However, as reported in the Gazette's sister publication, Litigation Funding, the principal ombudsman in the insurance division did set out the circumstances under which it was reasonable for policyholders to insist on insurers agreeing to their choice of solicitor, mainly in non-routine matters, such as clinical negligence and complex employment cases.

Tony Boorman said he found no evidence that panels disadvantage policyholders or that panel firms are of lesser quality than non-panel firms.

He also refused to rule that the definition of proceedings, for the purposes of policyholders' right to instruct their own solicitors once proceedings have begun, extends to before the issue of a claim.

The Association of Personal Injury Lawyers (APIL) has taken counsel's opinion which it says backs its view that panels impair solicitors' independence because firms have to 'buy' cases and cannot make claims for fees to the insurer.

It also argues that 'proceedings' does refer to pre-action work.

President Patrick Allen said non-panel firms have reached the end of the line with the ombudsman service.

APIL will now seek a suitable case to bring a judicial review or to persuade the government to amend the Insurance Companies (Legal Expenses Insurance) Regulations 1990.

He said the spirit of the regulations is being 'flouted'.

Had the government known about the push for pre-action settlement that would come later in the 1990s, 'they wouldn't have written regulations like these', he maintained.

Mr Boorman found that the policy in question was not clearly worded, and Mr Allen said this would apply to most policies.

'Policyholders have no idea what cover they have,' he said.

'They think it's broader than it is.'

Peter Smith, legal expenses manager at First Assist, welcomed the decision as 'another step back to normality' after the recent 'feeding frenzy' in the personal injury market.

'The availability of this cover at affordable premiums requires legal expenses insurers to manage claims effectively,' he said.

'That means supporting meritorious cases and avoiding big spend on cases which will not achieve the remedy sought.

Panel arrangements achieve this without sacrificing quality of service.'

- The decision is reported in detail in the April issue of Litigation Funding.

Neil Rose