Well progressed case covered by legal expenses insurance gone tricky

[Gordin]

Hi this my first post here - please feel free to move this to the appropriate forum.

I'm looking for some help with a quite well progressed legal case we have brought against the builders of our home, which has now reached the point of a possible settlement.

This is very long story but I will try and keep it succinct:

• Within a year of buying our new build home, it flooded internally with sewage. The flooding actually repeated a few times, suggesting we had bought a home that flooded with sewage every time a certain threshold of rain occurred.
• Obviously we had to move out, big insurance claim etc...
• It took a battle, but we managed to get the builders to dig up the sewer in ours and several neighbours gardens and engineer a redesigned sewage system.
• We are satisfied this has fixed the underlying issue. There has been no repeat incident since.
• We managed to get our legal expenses insurance to cover a claim against the builders. This was passed to solicitors who were also acting for the home insurance company, so we ended up in a situation where solicitors where jointly funded by our legal expenses insurers and our (previous) home insurers who were looking to recover their losses.
• Each party's pleaded claims are roughly equal in monetary value - give or take a couple of percent. Ours is largely made up of a claim on diminution in value to the property, plus a few other miner uninsured losses.
• This all happened years ago - it's been a long and at times frustratingly slow process - many expert reports etc - but the case is now with the courts, it has good prospects, and there is a date for a hearing next year... And there has been an offer of a settlement.

The settlement has been offered on a global basis. I understand the economic trade-offs involved with a settlement. I am completely on board with that and am happy to settle early for a reasonable offer.

However, the settlement has been presented by our solicitors in a way where our pleaded claim for diminution in value is dropped, so effectively the home insurers get 100% of their pleaded claim, and we get left with whatever is remaining - which is a very disappointing outcome for us. Legal advice on the diminution in value is that it is a "good potential head of claim", but the expert report and valuation is too old so a new valuation is needed, therefore it "could be less". The solicitors are arguing that it is uneconomical to do a new valuation so are removing this part of the claim entirely from the calculation of how to split the settlement. This feels very unfair. We don't dispute that the claim could be less, but don't see how that automatically goes to zero.

We've obviously grumbled about this a little bit and have made clear we are happy to settle but only on the understanding the settlement is split fairly between both parties. We've suggested an alternative split of the settlement which is a compromise on our part but is a kind of "meeting in the middle" offer.

And now I have received what I can only describe as a foul stinky letter from our legal expenses insurer basically saying "indemnity will be withdrawn if we fail to accept what the solicitors consider a fair and reasonable offer of settlement".

Which brings me to now and this forum post because I'm at a bit of a loss as to how to proceed from here. I have a few specific questions which you might like to answer:

• This feels like a swizzle to me. It feels ... unjust. Like the system is rigged against us. But am I being emotional? Is there anything you can say that would make me rationalise that the solicitor's proposed settlement is actually a good outcome for me?
• Do I have any rights here? Anything I can do to force a rethink? Eg can I ask for a second legal opinion on the diminution in value claim, or request new solicitors?
• Do I have any grounds for complaint against our legal expenses insurers and/or the solicitors? Is involving ombudsmen etc likely to be a help or hinderance at this point?
• If legal expenses did withdraw indemnity, how does that leave the case? Can the home insurance company still settle with the builders without our involvement, despite the fact the case is filed with the courts under our name? Or would this effectively be a nuclear action and destroy the case?
• Is voluntarily withdrawing from the legal expenses cover and instructing our own solicitors a viable option? Given that the case is already filed with the courts, can this be done at this stage? What would the process be?

Any help or insight you can offer is very much appreciated. Thank you.

[des8]

It all boils down to whether or not "it is uneconomical to do a new valuation" .

If that is an accurate assessment (and without seeing all the figures and costs it is impossible to guess) IMO you should go with the advice of your solicitor

[Gordin]

It all boils down to whether or not "it is uneconomical to do a new valuation" .

If that is an accurate assessment (and without seeing all the figures and costs it is impossible to guess) IMO you should go with the advice of your solicitor

The original valuation put the diminution in value at 10%. Its a four bed detached house. So it's a pretty sizeable claim. The legal opinion from counsel is basically that it is a*"good potential head of claim", but as some years have passed since the valuation (over 5 years) the diminution in value is likely to be less. I don't disagree with that, but there's a whole range of possible scenarios between less than 10% and zero.

We've been told a new expert report would be £2-3k, so we'd have to suspect the diminution in value was now at the very low end of that scale (eg 1% or less) for it to be totally uneconomical.

In any case, our gripe here is how the settlement is being split between both parties in the joint action. I don't even see it being necessary to get a new expert valuation. We already have the 10% figure and advice saying it's likely to be less, so my expectation would be that the solicitors could say "well why don't we call it 5%" or whatever - at least have the conversation and factor some kind of figure in to how they split the settlement. Instead its been removed entirely from any calculation and the net result is that the insurance company get to walk away with 100% of their pleaded claim and we get whatever is remaining. And it seems we don't have any way to object to it - we just have to take it.

[des8]

well here in West Wales you can buy a 4 bed house for less than £80,000 (https://www.rightmove.co.uk/property...-74958205.html) but I take it your property is nearer £300,000.

How was the diminution in value quantified?
The calculation of diminution in value is, as an insurance concept, very* flexible notion and* open to interpretation.Five years down the line and very possibly (depending on how it was calculated) the loss of value could have virtually disappeared.

You don't have to accept it, but if you don't it would appear that you will be in court by yourself unless you can get your solicitor on side.
Instructing another solicitor could be an expensive business