Your business has a serious dispute. A customer owes you £90,000, a supplier has breached an agreement, or you are defending a substantial contractual claim. You remember that your insurance includes legal expenses cover — so you notify the insurer and expect the legal costs to be funded.

Instead, you receive a letter saying something similar to:

Sometimes a percentage is given.

45%.

49%.

Or simply:

For a business owner facing potentially substantial legal costs, that can sound like the end of the matter.

The first task is to understand how the prospects decision was reached, what evidence was considered, who carried out the assessment and whether anything material has been overlooked or changed.

Why does 51% matter?

Legal expenses insurance commonly makes cover conditional on the proposed legal action having “reasonable prospects of success”.

The Financial Ombudsman Service says it interprets this to mean a 51% or greater chance of winning and does not regard that type of policy condition as inherently unfair.^[1]

That does not mean a lawyer can predict the future with mathematical certainty.

A prospects assessment is a professional legal opinion based on the law, evidence and information available at the time of the assessment.

The Ombudsman also explains that a case which was assessed below 51% can later settle or succeed without that necessarily proving the insurer's earlier decision was unreasonable. Its focus is on whether the insurer was reasonably entitled to rely on the legal advice and evidence available when it made the funding decision.^[1]

A 49% opinion is not a court judgment

A panel solicitor assessing a case at 49% is not deciding the litigation.

They are giving a legal opinion about its prospects.

That opinion may be properly reasoned and entirely reasonable.

But it may also deserve closer examination.

Questions worth asking include:

• Was an important document missing?
• Had a witness statement not yet been obtained?
• Was the relevant contract misunderstood?
• Has later evidence materially strengthened the case?
• Was an expert report unavailable when the first assessment was made?
• Did the assessment address the correct legal cause of action?
• Was the assessor experienced in the relevant area of law?
• Was a significant defence, factual point or counterargument overlooked?

The Ombudsman says prospects should be assessed by a suitably qualified lawyer with relevant legal knowledge. It may also accept a clear, well-reasoned assessment prepared by a paralegal where that person is properly supervised by an appropriately qualified lawyer.^[1]

Ask to see the actual prospects assessment

Do not stop at a two-line insurer rejection letter if the underlying reasoning exists.

You need to understand exactly what was assessed.

• What claim or defence did the lawyer assess?
• What documents were supplied?
• What factual assumptions were made?
• What legal issues were identified?
• What weaknesses drove the percentage down?
• Was enforceability or recoverability considered?
• Was limitation considered?
• Was expert evidence required?
• What specifically caused the assessment to fall below the policy threshold?

There is a significant difference between:

and:

The second explanation identifies the actual issue.

The insurer may be entitled to rely on its lawyer

This point matters because unrealistic advice does not help a policyholder.

The Ombudsman's current approach is that an insurer is generally entitled to rely on legal advice from a suitably qualified professional where that advice is clear, well reasoned and not obviously wrong.^[1]

So IDS should not be promising that every negative prospects assessment can be overturned.

The proper question is:

Has your legal expenses insurer refused funding because your case is below 51%?

Send us the rejection letter, policy wording, legal prospects assessment and the principal documents from the underlying dispute. We can review the funding decision and identify whether there is a proper basis for closer examination.

Start Free Legal Expenses Review

Free initial review. Any further paid work would be explained and agreed separately.

What if another solicitor says your case is above 51%?

This is where the dispute can change materially.

The Ombudsman's published approach says that where the policyholder disagrees with the insurer's prospects assessment, it will usually look for independent evidence from a qualified, comparable lawyer supporting the alternative view.^[1]

So simply writing:

is unlikely to carry the same weight as a properly reasoned independent legal opinion.

For example:

There is now a genuine disagreement between professional legal opinions.

What if two solicitors disagree?

This is one of the most commercially important parts of the Ombudsman's published approach.

Where solicitors disagree on prospects of success, the Financial Ombudsman says a further legal opinion will usually be needed from a qualified barrister with relevant legal knowledge, and it says it would place greater weight on the barrister's opinion than on the competing solicitor opinions.^[1]

That does not mean instructing a barrister automatically produces insurance cover.

It means that in the right case, specialist counsel's opinion can become highly relevant evidence in deciding whether the original prospects assessment remains sustainable.

This is where the wider litigation structure available through Access 2 Barristers Direct can become relevant.

The objective is not to find somebody willing to write “51%”.

The insurer should be willing to reconsider material new evidence

A prospects decision is not necessarily frozen permanently in time.

The Ombudsman's current guidance says that if panel solicitors consider a claim to lack reasonable prospects, the insurer should notify the policyholder and should be prepared to review matters further if the policyholder provides additional evidence or a favourable opinion from a comparable lawyer.^[1]

Imagine the original assessment says:

Three weeks later, archived emails are discovered containing the alleged representation in writing.

The evidential position has changed.

It is then legitimate to ask whether the prospects assessment also needs to change.

Is the problem legal merit — or missing evidence?

This distinction can be crucial.

The Ombudsman identifies several reasons why a proposed legal action may lack reasonable prospects, including:

• a lack of evidence;
• statutory or other time bars;
• immunities;
• decided case law; or
• no recognised cause of action.

Some evidential deficiencies may be capable of being addressed.

Others may not be.

If the entire case depends on proving an undocumented oral conversation and there is no supporting witness or documentary evidence, that may create a genuine difficulty.

If the missing evidence is a specialist report which has simply not yet been obtained, the analysis may be different.

Who should pay for evidence needed to progress the case?

That can itself become an insurance dispute.

The Financial Ombudsman has published a legal expenses case study involving a right-to-light dispute where the insurer wanted a further surveyor's report before progressing the claim but would not pay for it.

The Ombudsman concluded that the evidence already supplied was enough to establish that the claim was covered and that the additional report should have been treated as a necessary litigation expense. The insurer was required to reimburse around £6,000 of legal costs plus interest and pay £500 compensation for the way the claim had been handled.^[2]

That does not mean insurers always have to fund every preliminary expert report.

It shows why the policy wording, existing evidence and purpose of the proposed expert evidence need to be examined carefully.

Is the real issue proportionality rather than prospects?

Sometimes a business believes its legal expenses claim has been rejected because the case is weak when the real concern is cost versus recovery.

Those are different issues.

Suppose a business has a strong £15,000 claim, but pursuing it is expected to cost £40,000.

The insurer may say the case is not proportionate to fund.

The Ombudsman says proportionality is a common condition in legal expenses policies and generally considers it unreasonable to require an insurer to fund litigation that a prudent uninsured person would not sensibly fund themselves because the likely legal cost outweighs the amount in dispute.^[1]

So identify which decision has actually been made:

or:

They require different analysis.

What if the insurer says the dispute started before the policy?

Before-the-event legal expenses insurance is intended to protect against uncertain future disputes rather than problems already known when cover begins.

The Ombudsman says most BTE policies restrict cover to disputes or insured events which arise, or become known, after the policy starts. In considering these complaints it looks at the underlying event which prompted legal action and what the policyholder knew when the cover was taken out.^[1]

That is not always straightforward in a commercial relationship.

A supplier can be difficult for months before a legally actionable breach occurs.

A customer can complain without there yet being a genuine legal dispute.

The relevant event needs to be identified from the facts and policy wording, rather than simply selecting the earliest moment when the relationship became uncomfortable.

Late notification does not automatically answer everything

Legal expenses policies commonly require prompt notification of circumstances which could result in proceedings.

The Ombudsman says that when considering late-notification complaints it looks at whether the insurer has actually been prejudiced — for example through loss of evidence, difficulty locating witnesses, reduced witness recollection, time bars or increasing interest and costs.^[1]

It also says the insurer bears responsibility for showing that prejudice and that, where there has been no detrimental impact, it would not usually consider it fair to reject a genuine claim on late notification alone.^[1]

So a late-notification rejection should prompt a practical question:

“They say I must use their panel solicitor”

This is another major legal expenses insurance issue.

The Ombudsman's current approach is that insurers can generally use panel solicitors before proceedings become necessary, and it usually expects freedom to appoint a different solicitor earlier only in exceptional circumstances such as a genuine conflict of interest.^[1]

Once legal proceedings need to be started, however, the Ombudsman says the policyholder should ordinarily be allowed to choose their own solicitor, subject to matters such as the insurer's reasonable terms of appointment and remuneration arrangements.^[1]

The Insurance Companies (Legal Expenses Insurance) Regulations 1990 also contain statutory provisions requiring freedom to choose a lawyer in specified circumstances, including where recourse to a lawyer is needed in an inquiry or proceedings and where a conflict of interest arises.^[3]

That does not necessarily create an unlimited right to require the insurer to pay whatever hourly rate the chosen firm demands.

The Ombudsman accepts that insurers can place reasonable limits on remuneration, but not at a level that makes the policyholder's freedom of choice effectively meaningless.^[1]

Six documents IDS would want to see first

Do not spend thousands on another opinion before understanding the problem

It would be easy to tell every rejected policyholder:

That would not be responsible.

First identify why the original assessment fell below 51%.

If the case is plainly time-barred, obtaining repeated opinions may achieve nothing.

If the assessment appears to rely on an incomplete document set, a disputed point of specialist law or evidence that has since changed, an independent review may be more meaningful.

A sensible sequence is:

• Understand the rejection.
• Identify the reasoning in dispute.
• Identify whether material evidence is missing or has changed.
• Decide whether an independent opinion is justified.
• Then identify the right level and type of legal expertise.

Where Access 2 Barristers Direct fits

There is a natural dividing line between the insurance dispute and the underlying legal assessment.

Insurance Dispute Service examines whether the insurer's decision to refuse legal expenses cover deserves challenge.

That can include reviewing:

• the policy wording;
• the insurer's rejection;
• the existing prospects assessment;
• the evidence available when that assessment was made;
• whether relevant later evidence changes the position;
• whether the assessment appears to have been carried out with appropriate expertise; and
• whether the insurer has properly reconsidered the matter.

If the dispute reaches the point where an independent specialist legal opinion on the underlying case is genuinely required, Access 2 Barristers Direct can assist with litigation support and access to appropriate barrister expertise.

This is particularly relevant because the Ombudsman's published approach recognises the significance of a qualified barrister's opinion where solicitors disagree about prospects.^[1]

A refusal based on prospects is not the same as losing the case

The insurer is deciding whether it is contractually obliged to fund the litigation under the legal expenses policy.

A court or tribunal determines the underlying legal dispute.

Those are not the same exercise.

A case may eventually succeed even though an earlier prospects assessment was below the insurer's threshold. Equally, a favourable prospects opinion is not a guarantee that litigation will succeed.

Funding decisions are made prospectively.

Litigation outcomes are known only afterwards.

How Insurance Dispute Service can help

Insurance Dispute Service reviews rejected, underpaid, delayed and disputed insurance claims, including disputes concerning legal expenses cover.

Where funding has been refused because a case allegedly lacks reasonable prospects of success, we can examine:

• the legal expenses policy;
• the insurer's rejection;
• the panel solicitor's reasoning where available;
• the underlying evidence;
• whether the assessment was carried out by somebody appropriately qualified for the subject matter;
• whether material information appears to have been overlooked;
• whether relevant evidence has subsequently changed; and
• whether there is a proper basis for obtaining an independent legal assessment.

Where appropriate, specialist litigation support and access to relevant barrister expertise can be brought in through Access 2 Barristers Direct.

Frequently asked questions

Sources and further reading

1. Financial Ombudsman Service — Legal expenses insurance: reasonable prospects, proportionality, late notification and choice of solicitor
2. Financial Ombudsman Service — Loss-of-light legal expenses case study
3. The Insurance Companies (Legal Expenses Insurance) Regulations 1990

This article provides general information about legal expenses insurance disputes and does not constitute legal advice, an independent assessment of the merits of any underlying case, or a prediction of litigation success. The position depends on the individual policy wording, evidence, legal issues and procedural circumstances.