Kerry Underwood


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In Nobile v DAS Rechtsschutz-Versicherungs AG (Case E-21/16)

the European Free Trade Association (EFTA) Court considered whether provisions in a legal expenses insurance contract were compatible with the freedom for insured persons to appoint a lawyer set out in the Solvency II Directive (2009/138/EC).

Article 201(1)(a) of the Solvency II Directive states that, in relation to legal expenses insurance contracts, the insured person must be free to choose a lawyer, where recourse is had to a lawyer to represent the insured person in any inquiry or proceedings.

The court considered the compatibility of an insurer’s terms and conditions with Article 201(1)(a).

In reliance on its terms and conditions, the insurer had declared that it was not obliged to provide cover, as the insured person in question had instructed a lawyer without the insurer’s consent before the start of proceedings.

The court held that Article 201(1)(a) precludes terms and conditions in a legal expenses insurance contract that release the insurance company from its obligations under the contract if the insured person mandates an attorney to represent his interests, without the consent of the company, at a point in time when the insured person would be entitled to make a claim under the contract.

It rejected the argument that the application of the freedom to choose a lawyer was limited to judicial or administrative proceedings.

Here the court held that the right to choose one’s own lawyer applied at the stage of notification of the claim or any effort to settle a matter out of court, or any instruction of a lawyer to assess the legal and factual situation.

Thus the right arose as soon as a potential cause of action arose.

The court also held that it was not necessary for the insured to notify the BTE insurer in advance.

A BTE insurer has no right to deny coverage for the potential proceedings in issue because it deemed such proceedings to be unnecessary, or disproportionate or premature.

Such a right could motivate the insurance undertaking to reject coverage, which could deprive the insured person of the protection afforded by the legal expenses insurance contract.

If DAS’s contract was to be upheld then the insured person’s right freely to choose a lawyer would consist solely of the possibility of suggesting a lawyer, the acceptance of whom would be, ultimately, at the discretion of the insurance company.

It is incompatible with Solvency II Directive to accept that an insurance undertaking could be released from its obligations under legal expenses insurance contracts because the insured person breached some terms and conditions.

However that freedom to choose a lawyer cannot extend to obliging member states to require insurers to cover in full the costs incurred by the person instructed to represent the insured person.

Limitations of coverage may, for example, relate to a single claim or to the economic value of a claim.

However, terms and conditions to limit the coverage may not be such as to render it impossible for the insured person freely to choose a lawyer.


This is an interpretation of an EU Directive and it is likely that the UK will form part of a non-EU European grouping, including countries like Norway and Switzerland, once we leave the EU.

Any which way, these decisions are likely to remain binding on BTE insurers operating in the UK.

Yet another case at the most senior level stating in the clearest possible terms that an insured person under a BTE insurance contract has an absolute right to instruct lawyers of their choice the moment the course of action, or potential course of action, arises.

Yet another defeat for DAS.

In spite of the plethora of decisions of the European Court of Justice on this point, I know that I will get emails from solicitors saying that BTE insurers are refusing to indemnify their insured and allow them freedom of choice of lawyer etc.

The answer is very simple: sue in contract and seek indemnity costs and a Wasted Costs Order against the insurance company.

No ifs, no buts.


Written by kerryunderwood

November 17, 2017 at 11:29 am

Posted in Uncategorized

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