Free choice of lawyer expanded further legal aid insurance

On 31 March, the Kifid (Financial Services Complaints Institute) issued a ruling extending the right to free choice of lawyer. Not only do you have the right to choose your own lawyer when proceedings are initiated, but also in the preliminary stages.

The Disputes Committee of the Kifid looked into a case in which an athlete applied to her legal expenses insurer DAS for reimbursement of the lawyer's costs incurred. She had engaged a lawyer specialised in sports law to have an incorrect article about her in a magazine rectified and to claim compensation. DAS rejected this request, as it had not come to a procedure and the lawyer's fees had not been incurred in the context of a judicial or administrative procedure. The right to free choice of lawyer did not apply to the extrajudicial process.

The right to free choice of lawyer means that someone who has a legal expenses insurance must be able to choose a lawyer himself who can assist him in a procedure at the expense of the insurer.

Legal expenses insurers prefer to restrict this right as much as possible, because it is much more favourable to have the case handled by their own lawyers or by lawyers with whom they have made tariff agreements.

Initially insurers assumed that there was only free choice of lawyer in case of a procedure in which the assistance of a lawyer had been made compulsory by law.

The European Court of Justice ruled in 2013 that legal aid need not be compulsory. There is free choice in case of legal proceedings.

The insurer must then reimburse the reasonable costs of the lawyer chosen by the insured. The insurer may impose an own contribution or offer a maximum cover, but not in such a way that the right to one's own lawyer is actually deprived.

Last year the European Court of Justice further expanded the free choice of lawyer in a Belgian case by stipulating that every stage that can lead to proceedings before a court, even a preliminary stage, is covered by the term 'legal proceedings'.

The Dutch Association of Insurers was of the opinion that this decision of the Court would not apply to the Netherlands. As a result of this ruling, insurers have amended the policy conditions.

The Kifid follows the ruling of the European Court and sees reason to apply the explanation of the Court to the Dutch practice of legal expenses insurances. The concept of the term "legal proceedings" must be broadly interpreted in line with the judgment of the Court and cannot be limited by making a distinction between a preparatory phase and the decision phase. An insured person must have the possibility to call upon the external legal aid provider of his choice at any stage that may lead to court proceedings. The athlete's claim was therefore upheld.

DAS is of the opinion that the judgment is incorrect and has lodged an appeal, as a result of which the judgment of the Kifid has been suspended until a decision has been made on appeal. The Association of Insurers has indicated to support the appeal of DAS.

According to DAS, this widening of the free choice of lawyer will actually lead to a decrease in access to justice because the costs for legal aid insurers are no longer affordable and manageable. The expectation is that, with this extension, insured parties will more often and sooner make use of an external lawyer who usually charges much higher fees. As a result, the insured amount will be depleted sooner and there will be less money left over for e.g. litigation.

The Kifid is of the opinion that it is up to legal aid insurers and lawyers to inform the insured properly about both the possibilities and the risks, so that the insured can make a well-considered decision. In response to earlier extensions of the free choice of lawyer by the European Court, legal aid insurers have taken measures to keep the insurances affordable. It is up to the insurer to give further substance to this.

Should you have any questions, please do not hesitate to contact one of our lawyers. We will keep you informed of further developments!

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