Brown- Quinn & Anor v Equity Syndicate Management Ltd & Anor

Under the Insurance Companies (Legal Expenses Insurance) Regulations 1990, an insured’s freedom to choose a lawyer must be genuine. An insurer may limit the amount indemnified and need not pay every fee charged by the chosen lawyer, provided the limit does not make a reasonable choice of lawyer de facto impossible. Making appointment conditional on the lawyer accepting the insurer’s rates is an impermissible inhibition. The insurer must show evidence that the available reimbursement is insufficient before the contractual limit can be displaced. On the evidence, the insureds were entitled to the non-panel rates, but not more.

Three insured claimants wished to pursue employment and discrimination claims under legal expenses insurance policies. One claimant selected a non-panel firm. In two cases, solicitors who had initially acted through a panel firm moved to that non-panel firm. Burton J held that the insurers should meet reasonable fees, with the non-panel rate serving as a comparator, and granted declarations: [2011] EWHC 2661 (Comm). The insurers appealed after withdrawing a concession that recovery was not limited to the non-panel rate. The central issues were the proper construction of the policies and whether the Regulations prevented reliance on the contractual rate limit.

1. Leave to withdraw concession. Longmore LJ, with Lloyd LJ and McFarlane LJ agreeing, applied the approach in Pittalis v Grant [1989] QB 605. A pure point of law raised for the first time on appeal may be admitted where the other party had sufficient opportunity to meet it, suffered no detriment, and can be protected in costs. Those conditions were satisfied, so the insurers could withdraw the concession.
2. Construction of the policy. “Lawyer” and “appointed representative” were used synonymously in the relevant condition. The reference to standard terms of appointment incorporated those terms into the policy, although they were not annexed and were available on request. The policy had to be read as a whole; the definition of costs and expenses did not override its other terms.
3. Freedom of choice. The policy provisions reserving an undefined right to reject the insured’s representative and ending cover when the representative ceased acting breached the Regulations. A refusal to accept a chosen lawyer because that lawyer would not agree to charge no more than the non-panel rates would also seriously inhibit freedom of choice.
4. Cost limitation. The Directive and Regulations did not require insurers to pay the full cost of any chosen lawyer, however expensive. Under Stark v DAS Oesterreichische Allgemeine Rechtsschutz-Versichergung A.G. (2011) Case C-293/10, a cost restriction is permissible if it concerns only the extent of cover and the reimbursement remains sufficient to preserve a meaningful choice. The evidence was insufficient to show that the non-panel rates made reasonable choice de facto impossible. Guideline rates alone were inadequate.
5. The High Court’s order was set aside. The insurers were declared liable to pay the appropriate non-panel rates, but no more. Renewed permission to appeal on the question whether Webster Dixon rather than the insureds was the proper claimant was refused because the point had not been pursued below and was raised too late. The policy provisions had to be deleted or comprehensively redrafted.

1. Court of Appeal (Civil Division): [2012] EWCA Civ 1633. Appeal allowed. The High Court’s declarations were set aside and a declaration was substituted limiting recovery to the appropriate non-panel rates.
2. High Court of Justice, Queen’s Bench Division, Commercial Court: [2011] EWHC 2661 (Comm). Burton J held that the non-panel rate was a comparator rather than a starting point for assessing reasonable fees, and granted declarations.