Brown -Quinn & Anor v Equity Syndicate Management Ltd & Anor (Rev 1)

Under legal expenses insurance, freedom to choose a lawyer must be effective and is not limited to a single choice. An insurer may take account of panel and non-panel rates when assessing whether the chosen lawyer’s fees are reasonable, but those rates cannot operate as an absolute cap. The choice of lawyer does not, of itself, constitute an unreasonable step by the insured. Where an insured seeks to change representatives, an insurer’s consent must not be unreasonably withheld. A refusal based simply on increased cost may create a conflict of interest and breach the freedom of choice protected by the Insurance Companies (Legal Expenses Insurance) Regulations 1990.

These were three Part 8 test claims concerning before-the-event legal expenses insurance. The insured clients wished to use Webster Dixon LLP, a non-panel employment law firm, in employment and discrimination proceedings. The insurer initially refused cover unless the firm accepted fixed non-panel rates, and in transfer cases relied on a policy clause providing that cover ended when an appointed representative was dismissed.

The central issues were whether the insurer could limit recoverable fees by reference to its non-panel rates, whether choosing a non-panel lawyer was an unreasonable step, and whether an insured could change representatives after proceedings had begun.

1. Outset cases. The insured’s fees were to be assessed under CPR Part 48.3 by reference to the policy’s requirement for reasonable fees. The insurer’s non-panel rates were not an imposed starting point or cap. They were a comparator in the assessment.
2. The assessment was a hybrid exercise. It had to consider the availability of suitable solicitors at lower rates, together with the chosen firm’s location, specialisation, the claim’s complexity and importance, the strength and substance of the opposing party, and the nature of the work, including whether senior solicitors were reasonably required. The flat-rate structure of the non-panel terms could also be taken into account.
3. The insured’s choice of lawyer did not, of itself, amount to an unreasonable step or breach of the policy. The insurer could not decline to accept the chosen representative merely because that representative’s rates exceeded the non-panel rates or because the policy described such circumstances as exceptional.
4. Transfer cases. Freedom to choose a lawyer was not limited to one initial election. Clause 5 could not operate as an absolute right to terminate cover when the insured changed representatives. It was construed as containing an implied term that the insurer’s agreement to a new appointed representative could not be unreasonably refused.
5. An insurer could reasonably consider matters such as unnecessary duplication of costs. However, refusal simply because the transfer would cost more was unreasonable and could constitute a conflict of interest under Regulation 6(2). On the facts, the continued refusal to accept Webster Dixon was unreasonable.
6. Declaratory relief was therefore substantially appropriate. Webster Dixon was the appointed representative; the insurer could not refuse acceptance on the stated rate-based grounds; and its fees were subject to assessment under CPR Part 48.3, with the non-panel rates used only as a comparator.