Legal expenses insurance

Legal expenses insurers deserve a special mention. The types of insurers and policies can vary significantly.

High end bespoke policies with good insurers should pose few difficulties, though some of the points noted immediately above regarding third-party funding may well apply.

However, legal expense insurance is often bundled in with credit cards, house/motor insurance, bank accounts and mortgages. Such policies are mass sold at a low price and run as a call centre operation. Usually if a client wants to use this type of insurance, we will not be able to assist. It is a matter ultimately for you, but there are myriad issues with getting paid that you should consider carefully, including:

Most insurers require you to act on their very lengthy standard terms. These are typically non-negotiable though of course still need to be read fully and noted.
Some insurers will only use lawyers on their panel, we are not on every panel and might not qualify for all panels. Panel appointments can take weeks.
You may be required to act on a CFA, even their standard CFA.
You may be limited to costs recovered (or in other cases recoverable, i.e. the standard basis, even if not recovered) from the other side only, or if not, limited to a low hourly rate.
Fees are capped and estimates treated as caps.
You may be required only to invoice at the very end of the matter (i.e. not on an interim basis).
Invoices are paid slowly, sometimes as slowly as 180-day terms.
Invoices are often assessed by third party costs experts and slashed often by half (starting from their standard low rates, so effective recovery can be £50 per hour).
Usual chargeable disbursements are often excluded.
Mediation is often excluded.
There is often a provision that only the fees payable by the insurer can be charged and so we are prevented from having the client top up any shortfall on fees.
We are often required to police the policy and are only paid where it is in place/not vitiated.

We are often required to give indemnities.
We are often not allowed to limit our liability.

You should review any insurance policy terms carefully in the light of the above and generally look for other possible issues they might contain. While winning concessions from an insurer on its standards terms is almost impossible, if an aggregator (such as a broker) agrees to side with the client, they can have enough leverage to push a change through.

We understand that some insurers, for example DAS, requires that all our fees are assessed and then paid on the standard basis. This of course will mean all our invoices are materially reduced. We can claim the shortfall from the client unless agreed otherwise. However, insurer's standard terms do often prevent us from recovering the shortfall from the client. The strong consensus from colleagues who have acted for clients under "high street" LEI policies is that they wished they never had, so you are advised not to accept such instructions.

If you decide to act, then you should review your Engagement Letter, it may need to be reissued or amended by email to address payment terms and the client's liability for fees. You should explain how any shortfalls might arise in what insurers will cover and that you will need express written consent to disclose all matters about the case that come to your attention to the insurer as the matter progresses and to comply with insurers requirements. You should explain that there will be a cost for the extra work you need to undertake to meet insurer's requirements, e.g. of providing regular written prospects assessments. There is special wording in the template Engagement Letter dealing with insurance that you are advised to use (either stand-alone or by way of issuing a new Engagement Letter. To access this wording, create a new letter and answer yes to the legal expenses insurance questions.

You should recommend that you review the policy with an insurance colleague so you can advise on how it works and to what extent cover will be available. The client can refuse to instruct you to do so, but if so, youll need to warn the client that, by refusing to instruct you to review the policy, the client accepts that you may inadvertently breach the policy and this may lead to cover not being provided in future and for sums paid to be withdrawn.

You'll also need to explain to the client the insured's duty of the utmost good faith to make any disclosures to insurers that are relevant to the cover provided. Again, you should offer to expand on this and for an insurance colleague to advise on the client's obligations or you can make it clear that doing so is out of scope and you will not so advise, but the client takes the risk of cover being vitiated if any duties under insurance law are breached.