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FSA clarifies a policyholder’s freedom to choose their own lawyer

13 August 2010
By Michael Hayes

Following the European Court of Justice’s decision in Erhard Eschig v UNIQA Sachversicherung AG (C-199/08), the director of the Financial Services Authority’s insurance sector has written to all legal expenses insurers to clarify the scope of s6 of the Insurance Companies (Legal Expenses Insurance) Regulations 1990, which deals with the freedom of a policyholder to choose their own lawyer.

Eschig / the FSA have made clear that any provisions in a legal expenses policy which detract from, or qualify in any way, the freedom of a policyholder to retain a lawyer of their own choice, will be unlawful. Specifically, the July 2006 undertaking given to the FSA by legal expenses insurer DAS, pursuant to which the FSA had agreed that DAS was entitled to restrict a policyholder’s right to choose their own lawyer in exceptional circumstances, is longer acceptable as it contravenes the 1990 Regulations.

The FSA’s letter also confirmed that, contrary to the position taken by a number of legal expenses insurers, a policyholder’s right to choose their own lawyer arises before issue of Court proceedings.

The FSA has asked all providers of legal expenses insurance to inform the FSA by 30.09.2010 of the actions which they have taken to ensure that the terms of their legal expenses cover comply with the 1990 Regulations following the ruling in Eschig.

For a copy of the FSA’s letter, please click on the following link: http://www.fsa.gov.uk/pubs/other/lei_190710.pdf