Legal Expenses Insurance: The Insured’s right to choose its own lawyer - May 2011
In a recent case, the English court has considered whether or not legal expenses insurers can restrict the insured’s right to choose their own lawyer once proceedings have been commenced. The court held that, pursuant to well established Legal Expenses Regulations, the legal expenses insurer could not. The court also held that this applied to the insured’s right to instruct a barrister directly (so that the legal expenses insurer could not insist on a solicitor being instructed).
The insurance policy in question contained a clause which stated that the insured was free to choose an "appointed representative" but that the insurer "may choose not to accept [the insured’s choice], but only in exceptional circumstances". The Insurance Companies (Legal Expenses Insurance) Regulations 1990, SI 1990/1159 which govern legal expenses insurance in the UK state that, amongst other things, the insured has the right to choose its own independent legal representation as soon as proceedings have commenced.
The Court pointed out that the Regulations do not specifically provide for a restriction of this right in "exceptional circumstances". Accordingly, the Court considered that the Regulations appear to contemplate no circumstance in which a legal expenses insurer might choose not to accept the lawyer chosen by the insured. At the very least, the "exceptional circumstances" in the instant case would have to have been "very exceptional" for such a restriction to apply. Consequently, the Court granted the declaration sought and the insured was not obliged to go through a solicitor in order to instruct her barrister.
The case follows on the heels of the ECJ decision in Eschig, in which the Directive which formed the basis for the UK Regulations was considered. In that case, the ECJ held that an insured could insist on its own independent legal representation once proceedings had commenced even where the insured was part of a class action, with obvious costs benefits to having one lawyer representing all people within that class. There was, according to the ECJ, no exception to the basic right even in class actions.
This case highlights the fact that courts in the UK will not hesitate to apply the Regulations to legal expenses insurance policies. Legal expenses insurers should be aware that the mandatory provisions of the Regulations are clear and place significant restrictions on things like the ability insurers have to control who an insured may instruct under a legal expenses insurance policy. There is no “exceptional circumstances” restriction on that ability, and nor does it depend on any assessment of whether or not the legal expenses insurer is acting in the insured’s best interests.
It may be of some reassurance to legal expenses insurers to note that whilst the court was prepared to order a declaration that the insured was entitled to instruct the lawyer of her choosing, the court also held that an insured in this situation does not have a right to claim damages against a legal expenses insurer.
Nonetheless, legal expenses insurers will clearly need to ensure that their policies comply with the Regulations, particularly given that following the ECJ decision in Eschig, the FSA has taken an active interest in the way in which insurers are writing this class of business (see the FSA’s open letter to legal expenses insurers dated 12 August 2010).
Further reading: Pine v DAS Legal Expenses Insurance Company Limited (2011) EWHC 658 (QB)
Latest edition of A&B Covernotes released - SPRING 2011
New Motor Insurance Law 2011
The Continuous Insurance Enforcement (CIE) regulations were signed by Parliament on Friday 4th February 2011 and it is now an offence to be the registered keeper of a vehicle which may not be covered by insurance following a check against the Motor Insurance Database (MID), even if the vehicle is not driven on the road.
The DVLA and MIB are working in partnership to identify uninsured vehicles by comparing insurance and registered keeper records on their respective databases. Under CIE, the registered keeper of a vehicle will be responsible for ensuring that insurance is in place and will be contacted if the vehicle does not appear on the MID. It is anticipated that the first letters will be issued around June 2011.
Upon receipt of an advisory letter, keepers will be asked to:
1. update their DVLA record (if vehicle has been sold or transferred)
2. declare vehicle SORN (statutory off road notice) 3. buy insurance If the vehicle is insured and does not appear on www.askMID.com (Motor Insurance Database accessible to the public) and then the insurance provider should be contacted.
Enforcement, in the form of a fine, will only follow if the keeper fails to comply with one of the above.
Exemptions CIE does not apply in Northern Ireland. NI has a separate registration and licensing authority and they will make a decision whether or not to adopt CIE.
Vehicles are exempt from CIE, if:
1. Vehicle has a valid SORN (Statutory off road notice)
2. Vehicle is exempted from SORN (as untaxed before 31/01/98 and has had no tax or SORN activity since)
3. Vehicle recorded as scrapped Vehicle recorded as stolen and not recovered
4. Vehicle recorded as disposed to the trade Vehicle recorded as disposed
5. Vehicle recorded as exported
6. Vehicle is owned by the crown, tax class (60)
DVLA's Fleet Scheme
Policyholders who are registered as part of the DVLA's Fleet Scheme will be able to request a report from the DVLA of potentially uninsured vehicles. Enabling the policyholder to correct any vehicle discrepancies and avoid IAL letters and fines.
Next steps for you
The most important step that a client can take is to ensure they have a robust process to identify vehicle data to load in a timely and accurate manner.
The MIB is developing a marketing/publicity campaign to raise awareness of CIE amongst the general public and all involved parties. Further details will be available at www.directgov.co.uk In addition, the DVLA and MIB have prepared a question and answer document.
Bribery Act 2011 - Coming 1 July 2011
The corporate community has become accustomed to the US authorities frequently investigating and prosecuting offences under the US Foreign Corrupt Practices Act (FCPA). Until recently, the same could not be said about investigations and prosecutions by the UK authorities. In part, the historic failure to investigate and prosecute corruption offences has been attributed to a lack of impetus by the Serious Fraud Office. However, to some extent, the lack of action has been a result of the antiquated and piecemeal nature of the UK law on bribery and corruption.
However, with the enactment of the Bribery Act, when it arrives, with its wide-ranging changes and significant extra-territorial reach, one of the impediments will be that the bringing of successful prosecutions will be reduced.
Click here to learn more www.directorprotection.co.uk/news.php?news_id=57
Director’s Duties back on Agenda with new MP’s Bill
A new Private Members Bill has been put before the House of Commons. The Health and Safety (Company Director Liability) Bill would amend the Health and Safety at Work Act 1974 (“HSWA”) to place further statutory duties on directors. Currently, directors can be prosecuted as well as the company under Section 37 HSWA if the offence is proved to have been committed with the ‘consent or connivance of, or to have been attributable to any neglect on the part of’ any director (or person purporting to act in a similar capacity) of the company.
At present, the Health and Safety Executive (HSE) and the Institute of Directors encourage company boards to comply with their joint guidance issued in 2007. This voluntary compliance is designed to encourage directors to adopt good health and safety practice in the workplace. The guidelines take a common sense approach, highlighting the importance of good practice and procedures. Setting out a four-step process to establish essential health and safety principles, the publication also gives a brief overview of legal liabilities, a checklist of key questions for leaders and a list of resources and references for implementing the guidance in practice.
However the HSE is shortly to recommend to ministers whether or not further statutory duties should be introduced as in previous surveys undertaken, it was found that comparatively few organisations are aware of the guidance and fully utilise it in practice.
Due for its second reading on 23 April, the Bill was introduced under the ‘Ten Minute Rule’ by Frank Doran, MP for Aberdeen North. Only two bills introduced under the Ten Minute Rule have become law since 1998 and the rule is mainly used by MP’s to raise the profile of an issue. The issue of statutory duties on directors has been a point of contention for a considerable period of time as it is felt that the current approach is not working.
2009 review on freight crime
The crime hotspots of Europe have remained largely the same in 2009 as in the previous year with no real surprises. The usual hotspots top the list, including London, Venlo, Paris, and Birmingham. However, other countries and cities have started to appear on the radar, whether due to increased information gathering on the part of commercial intelligence units or in some cases, a genuine increase in the threat. Austria, Spain and Romania have now firmly established themselves as locations of growing criminal activity. Romania has been shown to be developing into a serious hotspot too. Increases in reporting of incidents in Greece, Sweden, Germany and Russia have also given the cargo community a greater understanding of the European wide nature of freight crime, which can only help fight freight crime throughout the EU.
Overall, Truckpol report a reduction in the number of truck crimes reported in 2009 in the UK, from the previous year. This is obviously good news and something to build on for 2010.
Latest edition of a&b's 'covernotes' now available
a&b to provide freightnet.com insurance platform
a&b has this week (16 October 2010) agreed to provide the on-line insurance platform for www.freightnet.com's new cargo insurance service, www.freightsure.com. The site will go live in late November, so watch this space!!
Legal ruling could have serious consequences for Freight Industry
A recent court ruling whereby a logistics company received a pallet of blue tooth mobile phone devices into their warehouse, which they knew nothing about, has sent shockwaves through the the Freight Industry. The pallet should not have been sent to them and should have instead been sent to Manchester Airport Handling Centre.
Unfortunately, whilst the receiving logistics were unwilling bailees of this pallet it was stolen in a raid.
Due to the fact that there was no contract between the receiving logistics company and the owner of the goods, the logistics company could not rely upon their standard trading conditions (BIFA), insurers would not pay the claim and as such were liable in full for the loss. The court ruling confirmed the logistics company must pay the goods owners' claim in full.
New a&b blog launches!
Welcome to our brand new blog site. Here, we’ll bring you the latest news and views from the insurance industry, give you a heads up on exciting developments at a&b and share our thoughts on some of the latest stories to hit the headlines.
You’ll see that as well as having a main page where we’ll include items relating to a wide range of topics, we’ve also put a few handy headings down the side to link in to topics that might be of specific interest, from freight insurance issues to tax related items.
So, enjoy your visit and if you have any suggestions for items we can cover in future, please email us at firstname.lastname@example.org.
Freight theft no game for computer industry
A recent incident saw a lorry load of ‘Brothers in Arms’ games was hijacked near Leeds, the thieves making off with an estimated £600,000 worth of software. Sadly for computer games distributors, or producers exporting/importing goods directly, this is not a one off case. Over the past year, the number of freight thefts targeting computer game shipments has increased rapidly. It seems freight crime is threatening to cripple the games market in the same way the mobile phone industry suffered just a few years ago.
Solicitors turn to insurance to boost income
Many solicitors firms are fighting to boost income streams right now. Reforms to the Legal Aid structure, replacing hourly rates with fixed pricing, have left many such firms in severe need of greater private client business in order to sustain their income levels. Coneyancing business has dried up dramatically and the credit crunch has seen many clients reduce their legal spend.
This article looks at how these factors are prompting many solicitors to look at providing insurance as a solution.