Article 4(1) of Council Directive 87/344 on legal expenses insurance precluded a legal expenses insurer, which stipulated in its insurance contracts that legal assistance would in principle be provided in-house, from also providing that the costs of legal assistance provided by a legal representative chosen by the insured would be covered only if the insurer took the view that the handling of the case had to be subcontracted to an external lawyer.

The claimant (“the insured person”) took out legal expenses insurance with the defendant, a Dutch insurance company. The contract of insurance provided that cases were to be dealt with by the insurer’s own staff but if, according to the insurer’s opinion, a case had to be delegated to external counsel, the insured person had the right to instruct a legal representative of his own choosing. The insured person wished to bring an unfair dismissal claim against his former employer and to that end, he wished to be assisted by a lawyer of his own choosing and to have the costs covered by his insurer. Under national Dutch law, legal assistance was not compulsory for such proceedings. The insurer indicated that it was prepared to provide legal assistance to the insured only through one of its own lawyers and was not prepared to bear the costs of an external lawyer. Subsequently, the insured appealed to the Hoge Raad der Nederlanden which referred to the Court of Justice of the European Union questions on the interpretation of article 4(1) of Directive 87/344 which provided, inter alia, that any legal expenses insurance contract had to expressly recognise that where recourse was had to a lawyer in order to “serve the interests of the insured person in any … proceedings”, that insured person was free to choose such a lawyer.

(1) The Court of Justice held that freedom of choice, within the terms of article 4(1) of Directive 87/344, 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, on condition that that freedom was not rendered meaningless. However, the insured person’s right to choose his lawyer could not be restricted to situations in which the insurer decided that recourse should be had to an external lawyer. Moreover, it made no difference whether legal assistance was compulsory under national law for the particular proceedings, since, first, the right freely to choose a representative was obligatory and of general application, and second, Directive 87/344, did not make the right to choose a representative and the scope of that right subject to national rules on legal representation.