KiFiD: also entitled to reimbursement of attorney fees in out-of-court proceedings.

According to a recent ruling by the Financial Services Complaints Institute (KiFiD), an insured person is also entitled to reimbursement of attorney fees if it does not come to trial.

What was going on?

This case involved an athlete who claimed from her legal expenses insurer the costs of a lawyer specializing in sports law. She had engaged this lawyer to have an erroneous article about her in the magazine of the Dutch Triathlon Federation rectified, and to claim damages. The legal expenses insurer denied this claim because it did not go to trial. There was an out-of-court procedure, for which the insurer said the right to free choice of lawyer would not apply.

KiFiD judgment

KiFid disagrees. According to KiFiD, every phase that can lead to court proceedings - including out-of-court proceedings - falls under the term 'court proceedings' as referred to in the policy conditions. In line with European case law, the term 'court proceedings' must be interpreted broadly. An insured must have the opportunity to engage the external legal assistance provider of his/her choice at any stage that may lead to court proceedings.

KiFiD realizes that this ruling may have consequences for the implementation of legal expenses insurance. For example, an insured runs the risk that most or all of the budget for the free choice of lawyer has already been used up in extrajudicial proceedings before he or she begins legal proceedings. It is up to legal expenses insurers and attorneys to inform policyholders of the possibilities and risks.

Binding or non-binding ruling

At the KiFiD, consumers and business owners can complain about a financial product or service. Financial service providers such as legal expenses insurers may be affiliated with the KiFiD on a binding or non-binding basis. Consumers and business owners must choose between a binding and a non-binding opinion when submitting a complaint to KiFiD. A binding judgment must be adhered to by both the consumer or business owners and the financial service provider. They cannot then take the complaint to court.

If the complaint is about €25,000 or more, the consumer or business owner can still go to the KiFiD Appeals Committee after a binding decision by the KiFiD. This exception also applies to the financial service provider. The Appeals Commission then gives a final binding opinion that both parties must abide by.

Profession

Although this KiFiD ruling is binding and the insurer must reimburse the athlete for the costs of legal assistance, the legal expenses insurer has already announced its intention to appeal. Although this particular case did not involve a claim of €25,000 or more, given the importance of the case, the appeal procedure has been opened exceptionally. As a result, this ruling will not, for the time being, lead to changes in the working methods of legal expenses insurers. We will have to wait and see how the Appeals Commission rules on this.

The full KiFiD ruling can be found here