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CJEU upholds right of legal expenses policyholder to choose own lawyer

A legal expenses insurer cannot place any restrictions on a policyholder's right to choose his or her own lawyer in legal proceedings which are to be funded by that insurance, the EU's highest court has ruled.14 Nov 2013

In a Dutch case, the Court of Justice of the European Union (CJEU) found that a clause in an insurance contract stating that it was up to the insurer to decide whether external lawyers should be instructed in any given case was too restrictive, even though the insured was free to choose his own lawyer if approval was given. However, it would be appropriate to impose limitations on the costs to be met by the insurer "in certain cases", it said.

"In interpreting a provision of EU law it is necessary to consider not only its wording but also the context in which it occurs and the objects of the rules of which it is part," the CJEU said in its ruling.

"In that regard, it follows ... that the interest of persons covered by legal expenses insurance means that the insured person must have the freedom to choose his own lawyer or other person appropriately qualified under national law for the purpose of any judicial or administrative proceedings. Accordingly, it follows ... that the insured person's right to choose his lawyer cannot be restricted to situations in which the insurer decides that recourse should be had to an external lawyer," it said.

The case related to an employment law dispute brought by a Mr Sneller against his former employer. Sneller had a legal expenses policy with DAS, an insurer, which provided that cases would be dealt with by the insurer's own staff unless the case had to be delegated to external counsel under the contract or in the opinion of DAS. If this was the case, the insured person had the right to instruct a legal advisor of that person's own choosing.

The Legal Expenses Insurance Directive gives an insured party the express right to choose the lawyer that will defend or represent him "in any inquiry or proceedings" and whenever a conflict of interest arises. Among its arguments, DAS claimed that as Dutch law did not require that Sneller obtain legal assistance in his case it could not be compelled to fund a lawyer. The CJEU disagreed with this too, stating that the directive did not "make the right to choose a representative and the scope of that right subject to national rules on legal representation".

However, the CJEU said that the right of an insured person to choose their own representative did not mean that member states were "obliged to require insurers, in all circumstances, to cover in full the costs incurred in connection with the defence of an insured person". However, that freedom of choice could not be "rendered meaningless", for example if any restriction on costs made it "de facto impossible" for an insured person to reasonably choose a representative.

The CJEU said that it was a matter for the national courts to decide whether or not such a restriction existed in any particular case.