Free choice of attorney under legal expense insurance: what business owners need to know now

Entrepreneurs with legal expense insurance sometimes assume that they can immediately engage their regular attorney for any legal issue, at the insurer’s expense. In practice, the situation is more nuanced. The right to free choice of attorney certainly exists, but the key question is: when exactly does that right arise—only once litigation actually begins, or earlier during the out-of-court preparation phase?

What does the right to free choice of attorney entail?

European rules on legal expenses insurance stipulate that an insured person may have their interests represented by a lawyer (or other qualified legal advisor) of their own choosing as soon as judicial or administrative proceedings are underway. In the Netherlands, this principle is linked to the discussion regarding Article 4:67 of the Financial Supervision Act (Wft) and the European Solvency II rules (Directive 2009/138).

For business owners, this is particularly relevant in conflicts that can escalate quickly: labor law disputes (such as dismissal proceedings), breach of contract, liability issues, debt collection and commercial disputes, or discussions with regulators. It is precisely in such situations that you often want a specialized attorney at the table early on.

The uncertainty lies in the extrajudicial phase

The discussion centers on the scope of the concept of “judicial proceedings.” In its judgment in Vlaamse Balies (C‑667/18, 2020), the Court of Justice of the European Union ruled that the concept cannot be interpreted narrowly to refer only to formal proceedings before a court; a phase that may lead to proceedings may also fall within its scope. This led to the argument that the free choice of counsel may also apply to preparatory steps, such as consultations, correspondence, and negotiations.

At the same time, a more cautious interpretation has been advocated in complaint and dispute resolution within the financial sector. For example, within KiFiD, a line of reasoning is evident that emphasizes that the free choice of counsel does not apply “always and everywhere,” but is primarily intended for situations in which judicial or administrative proceedings are actually underway (or are equivalent thereto). As a result, it remains uncertain for legal practice—and thus for business owners—how solid a claim to free choice of counsel is if you are still “only” in the amicable phase.

Lower courts: no clear-cut approach

This tension is also evident in case law at the district court level. In a case before the Gelderland District Court (2023), it was ruled that no legal proceedings were yet underway because the dispute was still in the amicable settlement phase. In a case before the District Court of The Hague (2023), however, it was deemed relevant that administrative proceedings (with the UWV) were already underway, meaning that the free choice of counsel could at least be considered from that point forward. For business owners, this means that the outcome can depend heavily on the timing of when you engage the insurer, the nature of the process (amicable, UWV, court), and whether the situation can be classified as a “proceeding.”

The Court of Appeal of ’s-Hertogenbosch (June 2025): Questions for the Supreme Court

In June 2025, in a case concerning in-kind legal aid insurance, the Court of Appeal of ’s-Hertogenbosch explicitly ruled that existing case law does not yet provide sufficient guidance to clearly define the scope of “legal proceedings.” The court notes that there is debate in lower courts regarding the interpretation of this concept, and that it is relevant to the assessment of the dispute whether a preceding phase may also fall under this concept.

For this reason, the court has announced its intention to refer questions for a preliminary ruling to the Supreme Court. The questions the court has in mind directly touch on the core of many coverage disputes between business owners and legal expenses insurers:

• Does “legal proceedings” exclusively cover the summons and petition procedures under the Code of Civil Procedure, or does it also include something else?
• If a preliminary phase is also included: when does that phase begin, and what activities mark the starting point?
• And if such a preliminary phase counts: may an insured party then also have their interests represented by the chosen attorney in an out-of-court context, for example during negotiations to prevent litigation?
• Finally: Is it compatible with European law for an insurer to reserve for itself, in the policy terms and conditions, the exclusive right to determine whether a legal proceeding has a reasonable chance of success, or to “indemnify” the insured in order to prevent litigation?

The court has adjourned the case and given the parties an opportunity to comment on the intent and the precise wording of the questions referred for a preliminary ruling.

What does this mean for business owners in practice?

Until the Supreme Court (and possibly a European court thereafter) reaches a final decision, it is prudent for business owners to proceed on the basis of the following practical principle: in the Netherlands, the right to choose one’s own attorney is, in any case, most enforceable once judicial or administrative proceedings have commenced. In the out-of-court phase, invoking the free choice of counsel is more often a point of contention, and the insurer will regularly rely on policy terms and internal assessments (such as the likelihood of success and a cost-benefit analysis).

That does not mean you are “left empty-handed” during the amicable phase. It does mean, however, that you must act strategically:

• Report the dispute to your legal expenses insurer in a timely manner and provide the information necessary to assess coverage and the approach.
• Request a clear determination of coverage and position, especially if you believe that litigation (or an administrative process) is unavoidable.
• Be alert to conditions the insurer uses to limit external assistance, and have them reviewed to determine whether such application is tenable in your specific situation.

Second Opinions and Coverage Disputes: How We Can Help

When your legal expenses insurer refuses to take on the case (or continue with it) or refuses to fully reimburse the costs of a lawyer you have chosen, a coverage dispute often arises. In such situations, an independent assessment of the coverage, the classification as a “legal proceeding,” and the applicable policy terms can be decisive.

Our firm assists business owners in analyzing policy terms, corresponding with the insurer, and—where applicable—utilizing the dispute resolution mechanism that many insurers include in their policy terms. This provides you with quick clarity regarding your position and your next steps.

Frequently Asked Questions About Free Choice of Attorney