ECJ 7 April 2016, case C-5/15 (Büyüktipi), legal expenses insurance

Under Article 4(1)(a) of Directive 87/344 any contract of legal expenses insurance must expressly recognise that, in any inquiry or proceedings, where recourse is had to a representative to defend, represent or serve the interests of the insured person, the latter is free to choose that representative. Thus, it follows from the wording of that provision that the term ‘inquiry’ must be read in opposition to the term ‘proceedings’ (§16-17).

An interpretation of the term ‘inquiry’, within the meaning of Article 4(1)(a) of Directive 87/344, in the manner suggested by Achmea, that seeks to limit the scope of that term to legal proceedings in administrative matters only, that is to say, those that take place before a court in the strict sense, to seek review of the lawfulness of the contested decision and determine definitively the legal position of the person concerned, would deprive the term ‘inquiry’ of its meaning (§18).

The text of the directive does not distinguish between the preparatory stage and the decision-making stage in an inquiry or proceedings. According to settled case-law, in interpreting a provision of EU law, it is necessary to consider not only its wording but also its context and the objectives pursued by the rules of which it forms part (§19-20).

The objective pursued by Directive 87/344, in particular Article 4 thereof, concerning the free choice of lawyer or representative, is to protect, broadly, the interests of insured persons. The general scope and obligatory nature of the insured party’s right to choose his lawyer or representative militates against a restrictive interpretation of Article 4(1)(a). In the present case, it is apparent that the rights of the insured person are affected both by the initial decision of the CIZ and by the decision taken in response to an objection, inasmuch as the factual assessment is made during that administrative stage and that assessment constitutes the basis of the decision made in the context of subsequent judicial administrative proceedings. In those circumstances, it is indisputable that the insured person has need of legal protection during a procedure that constitutes the indispensable preliminary stage for bringing an action before the administrative court (§21-23).

Such an interpretation cannot be called into question by Achmea’s argument that a broad interpretation of the right to a free choice of lawyer or representative would transform all legal expenses insurance into insurance based on the principle of ‘covering costs’(§24).

As regards the possible financial consequences for legal expenses insurance schemes, it must be recalled that, even if such financial consequences could arise, they may not lead to a restrictive interpretation of Article 4(1)(a). Directive 87/344 does not seek the complete harmonisation of the Member States’ legal expenses insurance contracts, and the Member States remain free, as EU law currently stands, to determine the body of rules applicable to those contracts, on condition that the principles laid down by that directive are not rendered meaningless. Thus, the exercise by the insured person of the right to choose his representative does not mean that, in certain cases, limitations may not be set on the costs to be borne by the insurer (§25).