Newsletter – November 2011

BTE Insurers face a blow over controlling policyholders' costs
 
The recent High Court decision in the matter of Webster-Dixon LLP and another versus Equity
Syndicate Management Ltd and others struck an important blow for freedom of choice and raises
potentially challenging arguments to the whole premise of Lord Justice Jackson's reforms.
 
Whilst the facts of the case are quite specific the principles upon which the High Court made its
findings are sound. Essentially the Claimants in the main actions elected to either transfer their instructions from a panel firm to a non-panel firm, or commence instructions from the outset with a
non-panel firm.
 
The BTE insurer in question in fact permitted the operation of the Claimants' legal expense
policies to allow the instruction of non-panel solicitors and set 'non-panel' rates which were
nominally higher than the panel firm rates.
 
The Court found that whilst they could take into account alternative rates available to a
Claimant had they used a panel firm, and further whilst the Court could also take into account
the rates another non-panel firm may have been willing to restrict themselves to, the non-panel
firm used by the Claimants in the main action relating to the index case could not be restricted
to the non-panel rates the BTE insurer had sought to impose. It ought to be noted that up to the
point of issue the Court maintained the position that rates and legal representation would be 
limited by the terms of a policy. However, beyond the point of issue the reasonableness of the
rates claimed fell to the Court to be decided as a general issue and was ultimately found to be
not be limited by the BTE insurer's own terms.
 
One of many potential implications resulting from this decision is an increase in premiums to
cover the possibility of policy holders successfuly instructing non-panel solicitors who successfully charge more than the commercially negotiated rates agreed with panel firms. Another potential consequence could be the withdrawal of BTE legal expense insurance as part of policies sold,
or greater transparency in making such clauses of a policy a clearly identifiable add-on with a
clearly identifiable price to purchase the same. BTE insurance providers may also need to
generally revise the limit of their liabilty, typically £50,000, if those limits presume paying only
low rates which have been driven down by commercial factors.
 
These are all consequences not envisaged by Lord Justice Jackson and, for some, will further
strengthen the argument that access to justice cannot be best served by the dual removal of
success fees and restrictions on the application or costs of BTE cover in the future.
 
A full transcript of the Judgment is attached.
 
 Approved Judgement
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