Norwich Union (NU) is being sued by West Sussex-based Reeds Solicitors in a dispute relating to the referral of legal expenses claims from Hill House Hammond (HHH).

In its High Court claim, Reeds said it had an oral agreement with NU and HHH under which 80% of claims arising from legal expenses cover provided by HHH would be referred to Reeds.

Reeds said that under the agreement, reached in 2002, the referrals would be made "for at least five years" and Reeds expected to receive 4,000 cases per year under the agreement.

Reeds alleged that, upon deciding to close HHH, NU converted HHH policies to NU Direct policies "so that referrals to the claimants would cease before the end of the five years minimum term". It claimed that this put NU in breach of the contract.

Reeds also alleged that, in subsequent negotiations between the firm and HHH in 2004, HHH refused to acknowledge the existence of the agreement, which Reeds claimed had already been put into effect, and refused to acknowledge any obligation to make referrals to Reeds.

Reeds said NU had established a subsidiary, BTE Lawline, to manage the referrals. Reeds added that, under the agreement, HHH was to have purchased Reeds' then trading name, LawLine, and Reeds would train staff and provide computer facilities for Evident Legal Services.

A NU spokesman said: "The matter is in the hands of our solicitors and we have nothing to add."