ARAG Legal Expenses Insurance Company · DRN-6263317

The complaint Mr B and Ms B complain that ARAG Legal Expenses Insurance Company will only pay £100 per hour for solicitor’s fees under their legal expenses insurance policy. Although the cover is in joint names, I’ll refer to Mr B throughout this decision as he made the claim. What happened Mr B made a legal expenses claim relating to an employment dispute. ARAG accepted the claim and offered Mr B the option of using one of its panel solicitors. Mr B wanted to use his own solicitor, which ARAG agreed to. However, ARAG said the most it would pay under the policy for his solicitor’s fees was £100 per hour. Mr B’s solicitor wouldn’t agree to this hourly rate and ARAG refused to increase it. Mr B complained to ARAG about this, as he thought ARAG’s refusal to increase the hourly rate meant that the option to choose his own solicitor was meaningless. ARAG issued a final response to the complaint on 14 July 2025. It maintained its decision and said the £100 hourly limit was in the policy wording. It said Mr B could move his claim to one of its panel solicitors or find another solicitor who could work within the hourly limit. ARAG acknowledged there had been some delays in its handling of the claim and offered Mr B £75 compensation for this. Unhappy with this response, Mr B brought a complaint to this service. Meanwhile he decided to use one of ARAG’s panel solicitors. Our investigator looked into the complaint but didn’t recommend it be upheld. He thought ARAG had acted fairly. Mr B didn’t accept our investigator’s findings and so the matter has been passed to me for a decision. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. Industry rules set out by the regulator (the Financial Conduct Authority) say insurers must handle claims promptly and fairly. Insurers must also provide information that is clear, fair and not misleading. I’ve taken these rules, and other industry guidance, into account when deciding what I think is fair and reasonable in the circumstances of Mr B’s complaint up to the date of ARAG’s final response. Where an insurer limits the hourly amount that it will pay for a policyholder to use their own solicitor, this needs to be made clear. The terms and conditions of Mr B’s policy says:

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‘If you choose a law firm as your appointed representative who is not a preferred law firm we will give your choice of law firm the opportunity to act on the same terms as a preferred law firm…The amount we will pay a law firm (where acting as the appointed representative) is currently £100 per hour. This amount may vary from time to time.’ I’m satisfied the policy is clear that the rate ARAG will pay is £100 hour. As our investigator has explained, as ARAG is the insurer paying the legal costs, it’s reasonable for it to have a say in the amount being charged. Mr B argues that his is a complex case, as the allegations made by his former employer are very technical in nature. So, he thinks it’s unreasonable to limit the hourly rate to £100. Panel solicitors have an agreement in place with insurers to charge a certain hourly rate. My understanding is that if a case is particularly complex, the solicitors can negotiate a higher hourly rate with the insurer. Or if the solicitors lack the necessary expertise to deal with a case, they can refuse to take it on. Here, two of ARAG’s panel solicitors were willing to take on Mr B’s case, and as far as I’m aware, they were willing to do so within the agreed hourly rate of £100. Also, ARAG has provided evidence that other employment claims have been dealt with by non-panel solicitors for the £100 hourly rate. So, I’m not persuaded that Mr B’s case is so complex that it can’t be dealt with at an hourly rate of £100, or that the hourly rate offered by ARAG is so low that it renders his freedom of choice of solicitor meaningless. Based on the information provided, I find that it was fair for ARAG to apply the policy terms to Mr B’s claim. This is because, whilst it is unfortunate Mr B’s solicitor wasn’t willing to act for the £100 hourly rate, I’m satisfied ARAG gave Mr B suitable alternative options to get the legal support he needed to pursue his claim. Mr B explains he’s unhappy with the panel solicitor’s handling of matters. He says that delays and missed deadlines meant he had to instruct his chosen solicitor privately. However, they are a separate firm of professionals to the insurer with their own set of rules and a different regulator. So, any complaints about the advice or actions of the panel solicitors would need to be directed to them in the first instance and then if Mr B is unhappy with the response, he can take his complaint to the Legal Ombudsman if he wishes. I can only consider ARAG’s handling of the claim, and I’ve done so up to the date of its final response. At that point, Mr B hadn’t agreed to use the panel solicitors. ARAG accepted there were some delays in its handling of Mr B’s claim. It said that whilst it aims to review claims and correspondence within five working days and action phone call- backs within 24 hours, it didn’t always do so. I see that Mr B had to chase ARAG on occasions for a response when this didn’t happen. ARAG offered Mr B £75 compensation for its handling of the claim. I think this compensation figure is reasonable and reflects the level of impact caused to Mr B. My final decision ARAG Legal Expenses Insurance Company has already made an offer to pay £75 to settle the complaint in respect of delays, and I think this offer is fair. So, my decision is that ARAG should pay Mr B and Ms B £75 compensation if it hasn’t already done so. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr B and Ms B to

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accept or reject my decision before 28 April 2026. Chantelle Hurn-Ryan Ombudsman

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