Two recent European Court of Justice (ECJ) decisions have again shown that the Court is willing to interpret legislation covering Legal Expenses Insurance (LEI) broadly and to uphold the rights of an insured party to choose their own legal representatives
Article 4(1) of the Legal Expenses Insurance Directive 87/3444/EEC (the “Directive”) provides that:
“Any contract of legal expenses insurance shall expressly recognise that:
Where recourse is had to a lawyer or other person appropriately qualified according to national law in order to defend, represent or serve the interests of the insured person in any inquiry or proceedings, that insured person shall be free to choose such lawyer or other person;”
However, despite the seemingly clear wording of the Directive, insurers often resist attempts by the insured to choose their own lawyer. Instead they will insist that, as a condition of the insured getting the benefit of the cover, a lawyer from the insurer’s own panel is appointed as legal representative.
The commercial reason for this is fairly obvious, an insurer is usually responsible for funding the insured’s legal fees and any compensation awarded against them. There is therefore a clear incentive for the insurer to seek to reduce the level of compensation awarded whilst also trying to keep legal fees to a minimum.
One of the ways which insurers have attempted to restrict an insured’s freedom to choose their own legal representation is to argue that the dispute in question does not constitute an ‘inquiry or proceedings’ for the purposes of the Article 4(1)(a). The ECJ recently considered arguments on this point in two cases from the Netherlands.
Massar v DAS Nederlandse Rechtsbijstand Verzekeringsmaatschappij NV (Case C-460/14) and in Buyuktupi v Achmea Schadeverzekeringen NV and Stichting Achmea Rechtsbijstand (Case C-5/15)
In both cases the ECJ found in favour of the insured party. The reasoning of the Court in both decisions was similar:
- An interpretation of ‘inquiry’ that limited the scope of that term to administrative legal proceedings, that is those that took place before a court, would deprive the term, as expressly used by the legislature of the European Union, of its meaning.
- The wording had to be interpreted against the context and objectives of the legislation of which it formed a part. The Court was clear that the objective pursued by the Directive, concerning the free choice of lawyer or representative, was to protect, broadly, the interest of the insured persons.
In both cases, therefore, the Court rejected a restrictive interpretation of the language in the Directive and indicated that ‘inquiry and proceedings’ are to be given a broad definition. In doing so they emphasised the ‘obligatory nature’ of an insured party’s right to choose their own legal representative.
Whilst the two cases in question concerned particular procedures in the Netherlands, the Court’s decision is largely consistent with previous rulings upholding the rights of the insured under the Directive. Given what is at stake commercially, it remains to be seen whether in future insurers will be less willing to resist the insured party’s freedom to choose their own lawyer. Nevertheless, for now, those with LEI in place should feel more confident in asserting their rights to instruct their own lawyers.
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