Background
In 2017, Peter Evans instructed Fletchers Solicitors Limited to pursue a personal injury claim arising from a road traffic accident. Fletchers signed Evans up to a Conditional Fee Agreement (CFA) at the outset, despite Evans disclosing through a funding questionnaire that he held family legal expenses insurance (LEI) as an add-on to his home insurance policy with Zurich. No enquiries were made of Zurich or the underlying LEI provider, DAS Legal Expenses Insurance Company Limited, for over two years. When a new fee-earner took over the file in 2019, she wrote to Zurich and other insurers, but Zurich’s reply — which included a reference to the policy booklet and a customer services telephone number — was treated as a non-response rather than an invitation to make further enquiries. The defendant never made contact with DAS at all. The case ultimately settled for £250,000, and Fletchers invoiced Evans £61,615.13, of which £30,365.13 represented a success fee capped at 25% of the relevant damages, together with an ATE insurance premium.
After settlement, Evans instructed JG Solicitors, who quickly identified DAS as the LEI provider and confirmed that DAS had no record of ever being contacted by Fletchers. The Zurich renewal pack confirmed that the policy in force at the time of the accident included family legal expenses cover managed by DAS, with personal injury expressly listed as a covered category. Evans brought proceedings under section 70 of the Solicitors Act 1974 seeking assessment of the bill, arguing that had proper enquiries been made he would have been funded through his BTE policy and would never have incurred a success fee or ATE premium.
Senior Costs Judge Rowley structured his analysis around five sequential questions: whether the defendant’s enquiries were unreasonable; whether LEI cover existed; whether using it would have avoided the deductions; whether Evans would in fact have used it; and what the consequences were for the bill.
The Court’s Holding
Senior Costs Judge Rowley held that Fletchers’ enquiries into alternative funding were unreasonable at every stage. Making no enquiries at all for more than two years was an obvious failing. When enquiries were eventually made in 2019, the firm failed to follow Zurich’s letter to its LEI administrator, DAS — whose identity was readily ascertainable — and the correspondence was drafted in a manner that tended to invite a negative or inconclusive response, thereby protecting the existing CFA arrangement. On the balance of probabilities, LEI cover was available: the plain words of the Zurich policy covered personal injury claims, Jackson LJ’s preliminary report on civil litigation costs confirmed that household BTE policies routinely extended to personal injury, and the DAS representative consistently declined to give a blanket denial, indicating that coverage turned on individual policy terms rather than a categorical motor-accident exclusion.
The court rejected Fletchers’ argument that the £50,000 limit of indemnity under the LEI rendered it unfit for purpose in a case of this value. The ATE policy actually taken out carried only a £100,000 limit — itself insufficient to fund a full trial — and top-up ATE cover has long been available in either scenario. The court was satisfied on the balance of probabilities that Evans would have used the BTE cover had he been properly advised, accepting his unchallenged evidence that he would unquestionably have taken the cheaper option. The court distinguished the professional negligence “loss of chance” approach in Perry v Raleys Solicitors [2019] UKSC 5, holding that the Solicitors Act assessment context did not call for that analysis.
However, the court declined to disallow Fletchers’ base costs entirely. The case of McDaniel & Co v Clarke [2014] EWHC 3826 (QB) — where all base costs were disallowed because the client had trade union backing and bore no direct liability — was distinguished on the basis that LEI provides an indemnity to the client, who remains primarily liable to the solicitor. The success fee was disallowed in its entirety. The ATE premium was noted as falling within the same reasoning but was not formally in scope for the current assessment.
Key Takeaways
- Solicitors must make prompt and genuine enquiries about BTE insurance at the outset of a retainer; a delay of more than two years before investigating a disclosed LEI policy is unreasonable as a matter of professional conduct and will render resulting success fees vulnerable to disallowance on Solicitors Act assessment.
- Correspondence designed to produce a negative or inconclusive response from an LEI insurer — thereby protecting an existing CFA — will be scrutinised critically; solicitors must follow obvious leads, including contacting the actual LEI underwriter rather than only the household insurer.
- A limit of indemnity under a BTE policy that is nominally insufficient to fund a full trial is not automatically fatal to the argument that LEI should have been used, particularly where the ATE policy actually taken out was equally insufficient and top-up cover was available.
- The “loss of chance” discount applicable in professional negligence cases (the Kitchen discount) does not apply in Solicitors Act assessments; the court resolves the causation question on the ordinary balance of probabilities.
- Disallowance of base costs requires the client to have been wholly relieved of liability (as with trade union funding); LEI, which merely indemnifies the client against a continuing liability to the solicitor, does not support that outcome under McDaniel.
Why It Matters
This decision reinforces — and sharpens — the obligations that have accumulated since Sarwar v Alam [2001] EWCA Civ 1401 and Garrett v Halton Borough Council [2006] EWCA Civ 1017 for personal injury solicitors acting under CFAs. It makes clear that the post-2013 landscape, in which success fees are no longer recoverable from opponents and therefore come directly out of clients’ damages, raises the stakes considerably: a failure to investigate BTE cover is not merely a procedural lapse but a breach that will strip the firm of its success fee on a detailed assessment. The judgment also offers a practical warning about correspondence strategies that pay lip service to BTE enquiries without genuinely pursuing them — courts will treat the absence of follow-up (such as a telephone call to a number provided in bold in an insurer’s letter) as evidence of a deliberate or negligent failure.
For solicitors’ costs practitioners, the case clarifies that neither an inadequate limit of indemnity nor the absence of certainty about coverage will necessarily protect a CFA-funded retainer when proper enquiries were never made. The finding that causation is resolved on the balance of probabilities rather than by loss-of-chance analysis further increases the exposure of firms that sign clients to CFAs without investigating pre-existing insurance.