THIRD PARTY CAPTURE: BTE INSURERS: PRACTICAL ADVICE
As readers will have seen from my various blogs in relation to certain insurance companies there are various different things going on and I now set out some of the scenarios:-
- The other side’s insurance company contacts the injured person direct and seeks to persuade them to deal direct with the insurance company themselves rather than instructing a solicitor to do so.
There is nothing legally wrong with that approach, although most of us think it is morally and ethically wrong.
As solicitors, which of course insurance companies are not and they are not governed by the Solicitors Code of Conduct, we are obliged when writing to the other party to advise them to take independent advice from a solicitor.
In my view that should be the law for insurance companies in these circumstances. The advice to the injured person is always to see a solicitor. Virtually all solicitors dealing with this type of work do an initial free first interview and so nothing is lost.
- The insurer contacts the client, even though solicitors are acting.
In my view this is far worse than scenario one and would be a serious disciplinary issue for a solicitor, but appears, remarkably, to be both legal for insurance companies and not in breach of what appears to be almost meaningless regulation of such companies.
In my view it should be made a criminal offence.
The practical advice to the client is to report the matter immediately to their own solicitors and to ask those solicitors to report the insurance company to its regulatory body and the client and solicitor should both write to their Member of Parliament and also to the local and national press. Any use of social media should also be made.
- The insurance company is not acting for the other side but seeks to “capture” the injured person by writing direct to them and offering to refer them to their pet panel of solicitors.
This is less serious but the client is always best advised to choose their own solicitor and agree their own terms with that solicitor.
- The client/injured person has legal expenses insurance, often known as Before-the-Event insurance, and the insurance company seeks to push the client to their panel solicitors.
This is perhaps the least objectionable of the scenarios as the individual has knowingly, normally, taken out legal expenses insurance at a low cost and must be assumed to know that “you get what you pay for”.
The client still has full freedom of choice of solicitor but the legal expenses insurance company is free to impose reasonable terms on those solicitors.
I say that the client knows that they have taken out such insurance.
This used to not be the case as it was often included, supposedly at no extra cost, on for example motor insurance policies, household insurance policies etc.
That is no longer the case as customers/clients must not be given such insurance without positively opting in, and this has led to a dramatic reduction in the number of people having Before-the-Event insurance.
Also the insurers must state the cost of that apparently free insurance, and on a typical motor policy that is £60.00 or £70.00.
- The client has Before-the-Event insurance/legal expenses insurance and the legal expenses insurer seeks to prevent that client from instructing their own solicitors and seeks to induce that person to disinstruct those solicitors.
This is illegal, although apparently not a criminal offence, but I will return to that point.
The European Court of Justice, the United Kingdom’s highest court, has time and time again ruled that such conduct is unlawful and has been highly critical of it, but unfortunately insurers still try it on.
Insurers do this generally because their panel solicitors will work for much lower rates than they would have to pay other solicitors.
In my view if an insurance company knowingly states the law incorrectly in order to seek to achieve this objective, and intends by so doing to achieve that objective, then they are potentially committing the criminal offence of obtaining a pecuniary advantage by deception, the deception being the making of a statement to the insured that they know to be untrue, and the pecuniary advantage being the payment of lower costs to their panel solicitors.
Again the client in those circumstances should report the matter, and get their solicitor to report the matter, to all of the regulatory bodies and to the police.
The civil action is a claim for breach of contract, including a claim for aggravated damages. The aggravating factor is that the Before-the-Event insurance company is knowingly acting in clear breach of a number of decisions of the European Court of Justice.
Such conduct may also amount to the tort of inducing a breach of contract, depending on what has been agreed between solicitor and client. Such action may be brought by the firm of solicitors and does not require the involvement of the insured/client.
In particular I am well aware that certain Before-the-Event insurers have a standard, and misleading, letter that they send out to solicitors seeking to represent their clients under legal expenses insurance.
AA Legal Services has a section in such letters which I regard as misleading and legally inaccurate. in my view maintenance of such position by AA Legal Services in any proceedings will almost certainly lead to an indemnity costs order against them, and depending on the way the case is conducted, could justify a wasted costs order personally against the solicitor involved.
For the avoidance of doubt I am not suggesting that the conduct of AA Legal Services is a breach of the criminal law.
For information on wasted costs and non-party costs orders please see WASTED COSTS AND NON-PARTY COSTS ORDERS: UNIFIED.
Obviously solicitors, as consumers, can move away from the AA to the RAC or such similar body that does not conduct itself in this manner.
Here is the offending text:-
“It appears [client’s name] does have access to legal expense insurance through an AA Home Insurance policy. Details of our conditions of indemnity can be found in the legal section of the Home Policy booklet as well as the AA website and are available from inception of the policy.
We are aware of the case of Massar v Das Nederlande Rechtsbijstand Verzekeringsmaatschappij NV (Case C ¿ 460/14) 2016 which you refer to. With respect it appears you have interpreted the outcome of this case incorrectly. The court was asked to look at the definition of “inquiry” defined within Article 4 (1) of the Council’s Directive 87/334/EEC. Paragraph 28 of the judgement clearly states “¿Article 4 (1)(a) of Directive 87/334 must be interpreted as meaning the term “inquiry” referred to in that provision includes the procedure at the end which a public body authorises as employer to dismiss an employee who is covered by legal expenses insurance.” In light of this, we wonder how your client’s personal injury claim falls within the definition of “inquiry” as defined by the European Court.
The Insurance Companies (Legal Expenses Insurance) Regulations 1990 provide the right of choice of solicitor from the time litigation is commenced, until that time we reserve the decision as to the choice of solicitor.
The Financial Ombudsman Service confirmed this position in the Ombudsman News, page 19, issue 26 (March 2003) where it stated: “We would not require an insurer to offer the policyholder a choice of solicitor at the start of the claim.”
As such, when it is possible to provide assistance this is achieved by instructing our panel solicitors to act. It should therefore be taken into account that any costs which have been incurred will not be met by us.
Therefore if [client’s name] would like to continue with his personal injury claim utilising his legal expense insurance at this stage, we would instruct the AA’s panel solicitors who has a specialist personal injury department. As they would be able to advise [client’s name] from the outset, we are confident they have the resources and expertise to deal with his claim in an expeditious manner.
- The client has legal expenses insurance/Before-the-Event insurance and instructs the solicitors recommended by that insurance company without protest.
There is little wrong with this, although I would prefer there to be a law that the insurer in those circumstances must point out to the client/injured person that they have freedom of choice of solicitors.
Having said that a person who knowingly takes out obviously cheap legal expenses insurance and then, without protest, goes to the solicitors recommended by those insurers has little ground for complaint. Adults of full capacity must be assumed to know what they are doing.
Virtually all of my posts on these subjects derive from information supplied to me by solicitors, barristers and the judiciary. Please keep them coming.
I am very well aware that there are many claimant firms who act in an entirely unacceptable manner and therefore also welcome case reports and case studies etc. from insurance companies and those instructed by insurance companies.
There are many perfectly reputable and decent insurance companies, and society and each of us needs insurance and needs the insurance business to run satisfactorily. Those good insurers are just as keen as the rest of us to get rid of the unacceptable practices of some insurance companies.
I deal with this subject, and others, in my book Selected Writings Volume I, price just £5.00 and available from Amazon here.
Please see my related blogs:-