Dispute with your legal expenses insurer? Find an independent arbitrator

You take out legal expenses insurance to ensure you have sufficient legal backing when facing the other party in a dispute. But what if the insurer is not a loyal ally and a conflict arises or is likely to arise? Consider a situation where you fundamentally disagree on the strategy to be followed, or where the insurer claims that your case has no realistic chance of success and decides not to pursue it further.

The dispute resolution scheme exists precisely for that situation. In this article, Koen Wanders and I explain, drawing on our experience as binding advisers, how the scheme works and what you need to bear in mind.

Only substantive disputes are eligible

The person handling your case is a legal expert or solicitor who represents your interests but is, at the same time, employed by (or working on behalf of) the insurer. In the vast majority of cases, this goes smoothly. Nevertheless, views may differ on the likelihood of success, the strategy for the case or whether to enter into a settlement. But whether or not to initiate proceedings, and before which body this should be done, is also a matter on which the insurer and the insured may disagree.

This can be a tricky issue. After all, the insurer is then both judge and party in the dispute with its insured. That is why the dispute resolution scheme was established for cases where you disagree with the insurer on the substance of the matter.

Disputes concerning cover, service or speed are excluded from this scheme, but may be referred to Kifid or the court.

The costs of the dispute resolution procedure

The dispute resolution procedure is based on Article 4:68 of the Financial Supervision Act (Wft). Under the aforementioned article, every legal expenses insurer is obliged to include in its policy conditions a procedure whereby the insured can refer the dispute to an independent arbitrator.

The main advantage of this procedure is that it can be completed quickly and that the costs are almost always borne by the insurer.

The appointment of the independent lawyer

In practice, we regularly see that the role of this independent arbitrator is fulfilled by a lawyer who is not employed by the insurer. This lawyer then acts as a binding adviser or as an arbitrator.

Insurers differ in the way the solicitor in question is appointed. Insurers often have lists of preferred solicitors. Sometimes, policyholders fear that, if these solicitors are on that list, they may not be entirely independent. That concern need not be justified, but the perception naturally plays a role for someone seeking justice.

We therefore always advise policyholders to take the initiative themselves by seeking out an independent solicitor. Most policies provide for this, but most policyholders are unaware of it.

Insurers generally go along with such recommendations. The precondition, however, is that we are truly independent. We must therefore not already be handling a case for you or have any other connection with you that could compromise our independence.

4 Practical tips to ensure your appeal under the dispute resolution scheme is successful in practice.

• Request your policy terms and conditions and check what is stated regarding the dispute resolution procedure.
• Support your position in writing. Explain why you believe the case does have a good chance of success or why a different approach would be better.
• Pay attention to deadlines. A request to use the dispute resolution procedure is usually subject to a time limit.
• Consider your preferred solicitor. You do not have to wait passively to see who the insurer appoints.

In conclusion

The dispute resolution scheme is a valuable resource in the event of conflicts with your legal adviser. However, this scheme remains underused, and most policyholders are unaware that they do not have to sit idly by until an adviser is appointed.

Are you stuck in a dispute with your legal expenses insurer and looking for advice on the procedure, or are you seeking an experienced binding adviser? Please feel free to contact Koen Wanders or Hugo Roelink at Fruytier Lawyers in Business. We have extensive experience as independent binding advisers and would be happy to help you find a solution.