CJEU: LEI policyholders can choose lawyer for mediation

CJEU: European Union encourages mediation

The right under EU law for people with legal expenses insurance (LEI) to choose their own lawyer in legal proceedings extends to mediation, the Court of Justice of the European Union (CJEU) has ruled.

Proceedings which were “capable of determining definitively the legal position of the insured person” meant they needed legal protection, it said.

The court continued: “The interests of the insured person who uses mediation will be better protected if he or she can rely on the right to a free choice of representative laid down in article 201 of Directive 2009/138, in the same way as an insured person who turns to the courts directly may so rely.”

Article 201 of Directive 2009/138, better known as Solvency II, provides that any LEI policy must expressly give freedom to choose their lawyer “in order to defend, represent or serve the interests of the insured person in any inquiry or proceedings”.

Further, a 1987 Directive – implemented in the UK as the Insurance Companies (Legal Expenses Insurance) Regulations 1990 – also provide that a policyholder has the right to choose their own solicitors – but only once legal proceedings start (or if there is a conflict of interest). Pre-issue, the insurer can dictate which solicitor is used.

The question of when ‘proceedings’ begin has been a running sore for claimant solicitors for many years but the Financial Ombudsman Service has long accepted it is when a claim is formally started. It says the insurer dictating choice of solicitor pre-proceedings is done for legitimate commercial and quality-control reasons.

The case before the CJEU was referred from Belgium, where two Bar associations are seeking to annul a 2017 law, in part because it removed LEI freedom of choice of lawyer in relation to mediation.

The CJEU explained: “That law, while extending that freedom to choose to arbitration proceedings, excluded it for mediation proceedings on the ground, first, that the presence of counsel is not likely to favour mediation and, second, that mediation is not necessarily based on legal reasoning.”

Whether formally part of the court process or not, mediation that is “capable of determining definitively the legal position of the insured person” was covered by the right to choose, the court ruled

It also observed that, given EU law itself encouraged the use of mediation, it would “inconsistent” to restrict the rights of people who decide to rely on it.

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