Panel solicitors and freedom of choice

Can legal expenses insurers still oblige a policyholder to use their panel solicitors before proceedings are issued?  In this article, Mark Lee looks at the implications of the European Court of Justice decision in Eschig v UNIQA Sachversicherung AG and the latest communications from the Financial Services Authority.

Before Eschig it was accepted that UK legal expenses insurers (LEIs) could insist on the use of their own panel solicitors up to the issuing of proceedings, because of the Insurance Companies (Legal Expenses Insurance) Regulations 1990 (the Regulations), which transpose the European Council Directive 87/344/EEC (the Directive) into English law. This approach was also formally approved by the Financial Services Ombudsman.

However, in Eschig, a group action claim, the ECJ disagreed. It held that European law guarantees a policyholder the right to choose his own solicitor from the moment that he has a right to claim legal expenses cover from his insurer. This legal right was not solely limited to cases where proceedings have already commenced, but instead exists from the outset of the claim (ie at the initial enquiry stage).

A letter from Ken Hogg, the Financial Services Authority (FSA) Insurance Director, sent to all LEI providers last month, supported this approach. He concluded that the freedom of choice to instruct a solicitor arises before the commencement of any enquiry or proceedings and, further, that any policy terms that detract from the freedom to choose a lawyer were not compliant with the Directive and also in breach of the Regulations.

Various LEIs disagreed and this prompted Mr Hogg to reconsider his opinion. He has since issued a revised letter, dated 12 August 2010, which includes two additional explanatory footnotes. These confirm the broad principle that the freedom to choose a lawyer under Article 4 of the Directive is guaranteed, but restricted to recourse to a lawyer in 'any enquiry or proceedings' or whenever a conflict of interest arises.  They also refer to the Court of Appeal's decision of Sawar v Alam, which confirmed that freedom of choice is only triggered once efforts to settle the claim by negotiation have failed and legal proceedings must be initiated.

Despite this change in approach, all LEIs must still inform the FSA of the actions they have taken to ensure that the terms of their legal expenses insurance comply with the Regulations, following the ruling in Eschig, by 30 September 2010.  It is, therefore, incumbent on all LEIs to carefully check their insurance terms to clarify if they are compliant with reference to the latest guidance.

To find out more, please contact Mark Lee

When can a tour operator be held liable for an excursion?

Under what circumstances can an injured party bring a claim against a tour operator in the UK to avoid having to bring a claim against a local entity in another country?

Under the Package Travel Regulations [Etc] 1992 (the Regulations), a tour operator can be held liable for injury and losses as a result of the improper performance of the holiday contract. This is regardless of who performed any component part of the package. 

The first issue relating to any excursion is whether it is covered by the Regulations and if the tour operator is liable under the Regulations.

Often, excursions are paid for separately and apart from the package contract.  The most common time for booking excursions is in-resort at the welcome meeting.  These excursion contracts fall outside the Regulations as they are not pre-arranged, sold or offered for sale at an inclusive price and are not sold in the United Kingdom as part of the package holiday. 

Notwithstanding this, a tour operator may still be found liable for the excursion if it can be shown that they were principal to the excursion contract.  The tour operator will normally say that although the excursion was booked through their representative, they were in fact only selling the excursion as an agent for the local excursion provider. 

Whether or not the tour operator will be found to be principal to the contract often depends on how the booking of the excursion took place and, in particular, what was said by any rep and any documentation provided at the time. Important factors to be considered are:

- where was the excursion booked?

- was the rep wearing the tour operator's uniform?

- what documentation was provided prior to booking?

- are you left with the reasonable impression that the contract was with the tour operator?

- were you told the tour operator was only acting as an agent for a local tour operator/excursion
   provider?

Where an excursion is sold by a tour operator’s local rep, the information provided by that rep, along with the excursion documents, should be clear and not leave a consumer with a reasonable view that the excursion contract is run by the tour operator.  If it is not clear to a reasonable customer, then despite the fact, as is often the case, that it is a local excursion provider, the tour operator can be found as principal to the contract.  However, the customer does have to show it was reasonable to believe that the excursion was being provided by the tour operator.  For example, if the customer was handed a leaflet at the time of booking, which discloses the fact that the excursion is provided by a local entity, but that leaflet was not read by the customer, then in all probability any claim against the tour operator would fail.

It can also be argued that a tour operator does have a duty to ensure that any local excursion provider they recommend is a reputable provider. 

To find out more, please contact Keith Dean

Rome II - clarification on its way?

The interpretation of the wording of EC Regulation 864/2007 (Rome II) has been one of the hot topics in the field of international travel litigation for the past 18 months or so. Claimant and defendant lawyers agree that, following the implementation of Rome II, it is the law of the country where the accident occurred which should ordinarily apply to the assessment of damages in relation to any new instructions.  However, what is currently not agreed, and what has been the matter of some debate, is the temporal scope of Rome II ie from what date did its terms begin to apply? 

The majority of claimant lawyers argue that it applies from the latest possible date (11 January 2009), to maximise the number of clients who will benefit from English levels of damages.  On the flipside, defendant lawyers argue that its terms apply from the earliest possible date (19 August 2007), to minimise their clients' exposure.  A decision must therefore be reached to clarify when Rome II applies.  In essence, there are three main options:

- Rome II should apply for all accidents which occur after 19 August 2007;

- Rome II will apply to all accidents which occur after 19 August 2007, but if legal proceedings are  
  issued prior to 11 January 2009, then Rome II will not apply;

- Rome II will only apply to accidents which occur after 11 January 2009.

In practice, some parties have agreed settlement of their cases on a middle ground, accepting that neither party really knows for sure how the law should be interpreted.  However, in the case of Homawoo v GMF Assurances & Others, the parties agreed that guidance should be sought from the court and therefore applied for a preliminary hearing on the issue.

The application was ultimately referred to the High Court, which considered the submissions made by each party.  Mrs Justice Slade decided that, in light of the number of cases before the English courts which will be affected by the determination of the issue, and the fact that no previous referral had been made, the sensible approach would be to seek guidance from the European Court of Justice. 

The decision by the High Court will have far-reaching consequences.  Most cases currently pending before other English courts on this issue will have to be put on hold pending the outcome.   As soon as a decision is made, claimants will have to consider their options and what evidence they need with reference to the applicable law.

To find out more, please contact Kieran Mitchell

Bus and coach travel - are passengers protected?

In this article, Joanna Wylie examines some of the issues arising from the proposed Regulation for passenger rights when travelling by bus and coach

More and more people are going on holiday to Europe by bus and coach transport, as many see it as a cheaper option.  But what protection is there for the consumer?

Currently, in contrast to other modes of transport, such as the Montreal Convention (for carriage by air), the Athens Convention (for travel by sea), the Rail Passengers Regulations and the Berne Convention (for travel by rail) there are neither international agreements, nor Community legislation establishing bus and coach passenger rights. 

The European Commission has, however, drawn up proposals for a Regulation on the Rights of Passengers in Bus and Coach Transport.  PEOPIL (the Pan European Organisation of Personal Injury Lawyers) has given feedback on the proposals. 

Most importantly the proposed regulations currently make no reference to an award of compensation for pain, suffering and loss of amenity after suffering personal injury. 

With regards to compensatory awards for financial losses, an injured person must establish that the costs were 'necessary'. This is a higher threshold than the usual test of reasonableness and consequently it will be harder to recover as much compensation for out-of-pocket expenses as would normally be the case with an RTA in the European Union.

The proposed Regulations also offer no entitlement to bereavement damages in relation to a fatal accident although it does allow damages for loss of dependency in limited circumstances.  These damages are only payable when there is a 'legal' duty to maintain a person, whereas in the Rail Passengers Regulation, for example, there is no such requirement.

There is no indication as to when the final proposal is likely to be forthcoming so it remains to be seen how much protection it will afford the consumer.

To find out more, please contact Joanna Wylie