The legal insurance industry is keeping cases away from lawyers but there is good news on client choice.

When was the last time that you read those two words ‘good’ and ‘news’ together in a Gazette article? But there has been just such news delivered in the last few days by the Court of Justice of the European Union in Luxembourg.

This concerns a legal expenses insurance case (Case C‑442/12) that I have mentioned previously. Essentially, in the long-running saga over the insured’s right to choose a lawyer, the court struck down restrictions in an insurance contract which attempted to impose the use of the insurance company’s own unqualified staff over that of an outside lawyer chosen by the insured.

 Mr Sneller was dismissed from his job, and wanted to bring an unfair dismissal claim in the Netherlands against his employer, using his DAS legal expenses insurance. The insurance contract provided that DAS’s own staff were to deal with cases, and only ‘if, according to the contract or in DAS’s opinion, a case must be delegated to external counsel, the insured person has the right to instruct a lawyer or legal practitioner of his own choosing’. You can see what happened next: Mr Sneller wanted to use a lawyer of his own choosing, but DAS wanted to use one of its own staff, who was not a lawyer. Legal assistance is not compulsory in the Netherlands for the kind of proceedings which Mr Sneller wanted to bring against his employer.

The question came down to who had the right to decide whether external counsel should be used, Mr Sneller or DAS. Mr Sneller had some persistence. The first round, in the court of first instance in Amsterdam, went to DAS. The second round, in the Court of Appeal of Amsterdam, went to DAS. It was the Supreme Court which referred the questions of law to the European Court of Justice.

The relevant article is article 4(1)(a) of Directive 87/344:

 ‘Any contract of legal expenses insurance shall expressly recognise that:

(a) 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’.

DAS argued that, since the wording used in the expression ‘where recourse is had to a lawyer’ is passive – also used in the German, French and Dutch versions – it meant that the article itself does not determine whether, in proceedings, it is for the insurer or the insured person to decide whether an external lawyer is necessary. Therefore, said DAS, it followed that DAS was free to decide the issue in its insurance contracts, and so insist on an unqualified member of its own staff undertaking Mr Sneller’s representation in unfair dismissal proceedings.

The Court of Justice was categorical in its rejection of DAS’s interpretation, saying: ‘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…  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… the objective pursued by Directive 87/344, in particular article 4 thereof, broadly to protect the interests of insured persons (see, to that effect, Eschig, paragraph 45) is incompatible with a restrictive interpretation of article 4(1)(a) of that directive, such as that proposed by DAS’. Break out the champagne!

DAS had also argued that insurance premiums would rise unreasonably if every insured person was given the free right to choose. But the court said that freedom of choice does not mean that member states are obliged to require insurers, in all circumstances, to cover the costs incurred in full, provided that that freedom is not rendered meaningless, that is if the restriction imposed on the payment of those costs were to make a reasonable choice of representative impossible. In any case, the contracting parties remain free to agree cover for a higher level of costs, possibly against a higher premium.

Finally, the court said that it made no difference whether legal assistance was or was not compulsory for the particular proceedings.

This is just the latest round of strenuous efforts by the legal insurance industry to keep cases away from lawyers. It is good to see that the Court of Justice has kept to the spirit of the directive, by allowing clients to decide the matter of choice of lawyer.

Jonathan Goldsmith is secretary general of the Council of Bars and Law Societies of Europe, which represents around a million European lawyers through its member bars and law societies. He blogs weekly for the Gazette on European affairs