CELEX: 51979PC0396
Language: en
Date: 1979-07-18
Title: PROPOSAL FOR A COUNCIL DIRECTIVE ON THE COORDINATION OF LAWS, REGULATIONS AND ADMINISTRATIVE PROVISIONS RELATING TO LEGAL EXPENSES INSURANCE

N o C 198/2                               Official Journal of the European Communities                              7. 8. 79
                                                                II
                                                        (Preparatory Acts)
                                                  COMMISSION
               Proposal       for a Council Directive on the coordination of laws, regulations              and
                                  administrative provisions relating to legal expenses insurance
                                 (Submitted by the Commission to the Council on 23 July 1979)
THE COUNCIL OF THE EUROPEAN                                              parties and legal defence, either with one another
COMMUNITIES,                                                             or with other classes';
Having regard to the T r e a t y establishing the                    Whereas there exist therefore at present barriers to
European Economic Community, and in particular                       the establishment under effective conditions of
Article 57 (2) thereof,                                              competition of agencies and branches transacting
                                                                     legal expenses insurance; whereas it is essential to
Having regard to the proposal f r o m the Commission,                remedy this situation;
Having regard to the opinion of the European Par-
liament,                                                             Whereas, in order to protect policyholders, steps
                                                                     should be taken to prevent any conflict of interests
                                                                     between a person with legal expenses cover and his
Having regard to the opinion of the Economic and
                                                                     insurer arising out of the fact that the latter is
Social Committee,
                                                                     covering him in respect of any other class of
                                                                     insurance referred to in the Annex to the
Whereas Council Directive 7 3 / 2 3 9 / E E C of 24 July             abovementioned Directive or is covering another
 1973 on the coordination of laws, regulations and                   person;
administrative provisions relating to the taking-up
and pursuit of the business of direct insurance other
                                                                     Whereas the system of compulsory specialization at
than life assurance ('), eliminated, in order to fa-
                                                                     present applied by one M e m b e r State, the Federal
cilitate the taking-up and pursuit of such activities,
                                                                     Republic of Germany, precludes the majority of such
certain differences existing between national laws;
                                                                     conflicts; whereas, however, it does not appear
                                                                     necessary, in order to obtain this result, to extend
Whereas, however, Article 7 (2) (c) of the said                      that system to the entire Community, which would
Directive 7 3 / 2 3 9 / E E C provides that:                         require the splitting up of composite undertakings;
     'Pending further coordination, which must be
     implemented within four years of notification of                Whereas the desired result can equally well be
     this Directive, the Federal Republic of Germany                 achieved by requiring such composite undertakings to
     may maintain the provision prohibiting the simul-               adopt a separate management comprising in particular
     taneous undertaking in its territory of health                  separate accounting and a separation of contracts or
     insurance, credit and suretyship insurance or                   of the cover provided under a single contract;
    insurance in respect of recourse against third                   whereas the management of claims in respect of legal
                                                                     expenses cover by an entity having separate legal
                                                                     personality is also an appropriate way of precluding
(') O J N o L 228, 16. 8. 1973, p. 3.                                the risk of a conflict of interests;
 ---pagebreak---  7. 8. 79                                               O f f i c i a l J o u r n a l of t h e E u r o p e a n C o m m u n i t i e s                                            N o C 198/3
 W h e r e a s , in o r d e r t o attain this s a m e objective,                                                                                 Article 2
  specialized u n d e r t a k i n g s m u s t also c o m p l y w i t h
  certain provisions; w h e r e a s m e m b e r s of their staff                                        T h i s Directive shall apply t o t h o s e v a r i o u s e l e m e n t s in
  w h o deal w i t h t h e m a n a g e m e n t of claims o u g h t n o t                                a c o n t r a c t of legal expenses i n s u r a n c e w h e r e b y t h e
  t o c a r r y on at t h e s a m e time a similar activity in an                                       insurer provides services o r bears costs f o r t h e
  u n d e r t a k i n g t r a n s a c t i n g a n o t h e r class of i n s u r a n c e ;                p u r p o s e , in p a r t i c u l a r , o f :
                                                                                                        — securing c o m p e n s a t i o n f o r t h e loss, d a m a g e o r
 W h e r e a s t h e c o n f l i c t of interests w h i c h m a y arise                                         i n j u r y s u f f e r e d by t h e insured p e r s o n , w h e t h e r by
 b e t w e e n an in su r er a n d an in s u r e d p e r s o n implies t h a t                                  settlement o u t of c o u r t o r t h r o u g h civil o r
 t h e latter m u s t be f r e e to c h o o s e his l a w y e r ;                                               criminal p r o c e e d i n g s ,
                                                                                                        — d e f e n d i n g t h e ins ure d p e r s o n in civil, criminal,
 W h e r e a s conflicts m a y nevertheless arise b e t w e e n                                                 administrative o r o t h e r p r o c e e d i n g s o r in respect
  insurer a n d i n s u r e d ; w h e r e a s it is i m p o r t a n t t h a t t h e y                           of a n y claim m a d e against him o t h e r w i s e t h a n
  be settled in t h e fairest a n d speediest m a n n e r possible;                                             t h r o u g h such p r o c e e d i n g s .
 w h e r e a s it is a p p r o p r i a t e t h e r e f o r e t h a t provision be
 m a d e in legal expenses i n s u r a n c e policies f o r an arbi-
 t r a t i o n o r equivalent p r o c e d u r e ;
                                                                                                                                                 Article 3
 W h e r e a s t h e s e c o n d p a r a g r a p h of p o i n t C of t h e                               1.         All u n d e r t a k i n g s w h i c h t r a n s a c t at t h e s a m e time
 a b o v e m e n t i o n e d Directive 7 3 / 2 3 9 / E E C provides t h a t                             legal expenses i n s u r a n c e a n d i n s u r a n c e in o n e o r
 t h e risks i n c l u d e d in classes 14 a n d 15 in p o i n t A m a y                                m o r e o t h e r classes set o u t in t h e First C o o r d i n a t i o n
 n o t be r e g a r d e d as risks ancillary t o o t h e r classes;                                     Directive shall m a n a g e legal expenses i n s u r a n c e
                                                                                                        separately f r o m t h e o t h e r classes of i n s u r a n c e .
 W h e r e a s an i n s u r a n c e u n d e r t a k i n g s h o u l d n o t be able
 t o c o v e r legal expenses as a risk ancillary to a n o t h e r
 risk w i t h o u t h a v i n g o b t a i n e d an a u t h o r i z a t i o n in                          2.         T h e separate m a n a g e m e n t shall be o r g a n i z e d in
 respect of t h e legal expenses risk; w h e r e a s a r e f e r e n c e                                 such a w a y t h a t t h e s i m u l t a n e o u s t r a n s a c t i o n of legal
 t o class 17 s h o u l d t h e r e f o r e be inserted in p o i n t C of                                expenses i n s u r a n c e a n d o n e o r m o r e of t h e o t h e r
 t h e said A n n e x ,                                                                                  classes set o u t in t h e First C o o r d i n a t i o n Directive
                                                                                                        shall n o t p r e j u d i c e t h e interests of the insured p e r s o n
                                                                                                        w i t h r e g a r d t o the c o v e r of legal expenses.
                                                                                                        T h i s shall m e a n in p a r t i c u l a r t h a t :
                                                                                                        — separate a c c o u n t s shall be k e p t in respect of t h e
HAS A D O P T E D T H I S DIRECTIVE:
                                                                                                                legal expenses business,
                                                                                                       — legal expenses cover shall be the subject of a
                                                                                                                c o n t r a c t s e p a r a t e f r o m t h a t d r a w n up f o r t h e
                                            Article    1                                                       o t h e r classes of i n s u r a n c e o r shall be dealt w i t h in
                                                                                                               a s e p a r a t e section of a single policy in w h i c h t h e
T h e p u r p o s e of this Directive is t o c o o r d i n a t e t h e                                         n a t u r e of t h e legal expenses cover a n d t h e a m o u n t
provisions             laid        down           by       law,         regulation         or                  of t h e relevant p r e m i u m shall be specified.
administrative actio n c o n c e r n i n g legal expenses
i n s u r a n c e as r e f e r r e d t o in p a r a g r a p h 17 of p o i n t A of
t h e A n n e x to C o u n c i l Directive 7 3 / 2 3 9 / E E C , h e r e i n -                          3.          F u r t h e r m o r e , M e m b e r States may r e q u i r e u n d e r -
a f t e r called 'First C o o r d i n a t i o n D i r e c t i v e ' , in o r d e r to                   takings w h i c h t r a n s a c t o r wish t o t r a n s a c t w i t h i n their
eliminate a n y possible conflicts of interest b e t w e e n a                                          t e r r i t o r y at t h e s a m e time legal expenses i n s u r a n c e
p e r s o n with legal expenses cover a n d his insurer                                                 a n d i n s u r a n c e in o n e o r m o r e o t h e r classes set o u t in
arising o u t of t h e f a c t t h a t t h e latter is c o v e r i n g him                              t h e First C o o r d i n a t i o n Directive t o e n t r u s t t h e
in respect of a n y o t h e r class of i n s u r a n c e r e f e r r e d t o                            m a n a g e m e n t of claims in respect of legal expenses
in t h a t A n n e x o r is c o v e r i n g a n o t h e r p e r s o n .                                 i n s u r a n c e t o an entity having s e p a r a t e legal p e r s o -
                                                                                                        nality. T h i s c o m p a n y shall be m e n t i o n e d in t h e
                                                                                                        c o n t r a c t o r s e p a r a t e section r e f e r r e d to in t h e s e c o n d
T h i s Directive d o e s n o t apply t o legal expenses
                                                                                                        i n d e n t of p a r a g r a p h 2. M e m b e r States w h i c h m a k e
i n s u r a n c e w h e r e such i n s u r a n c e is linked w i t h t h a t in
                                                                                                        use of this o p t i o n shall so i n f o r m t h e C o m m i s s i o n a n d
respect of liability arising o u t of t h e use of ships,
                                                                                                        the o t h e r M e m b e r States.
vessels o r boats o n t h e sea, as r e f e r r e d t o in
p a r a g r a p h 12 of p o i n t A of t h e A n n e x r e f e r r e d t o                             Article 4 of this Directive shall apply by a n a l o g y t o
above.                                                                                                 t h e relations b e t w e e n t h e u n d e r t a k i n g w h i c h t r a n s a c t s
 ---pagebreak--- N o C 198/4                          Official Journal of the European Communities                           7. 8. 7 9
both legal expenses and other insurance and the              what action should be taken, the dispute shall be
company which is entrusted with the management of            resolved by one or more persons who shall be lawyers
claims.                                                      or arbitrators.
4.    Every contract of legal expenses insurance             The insured person shall not be required to bear more
entered into by an undertaking which transacts such          than one half of the costs resulting from such
insurance and one or more other classes of insurance,        procedure.
but does not entrust the management of claims in
respect of its legal expenses business to an entity
having separate legal personality, shall provide that                                 Article 7
where the person enjoying legal expenses cover calls
upon the insurer to meet obligations in respect              Member States shall abolish all provisions which
thereof, the latter shall advise him of any factor liable    prohibit an insurer from carrying on within their
to bring about a conflict of interests between them          territory legal expenses insurance and other classes of
and shall at the same time give him the possibility of       insurance at the same time.
entrusting the defence of his interests to a lawyer of
his choice. Any insurer not fulfilling this obligation
shall compensate the insured person for any resultant                                 Article 8
loss.
                                                             The second paragraph of point C of the Annex to the
                                                             First Coordination Directive shall be replaced by the
                         Article 4                           following text:
                                                                 'However, the risks included in classes 14, 15 and
Where an undertaking transacting only legal expenses
                                                                  17 in point A of this Annex may not be regarded
insurance has financial, commercial or administrative
                                                                 as risks ancillary to other classes.'
links with an undertaking which transacts one or
more of the other classes of insurance set out in the
First Coordination Directive, no member of the                                        Article 9
management of the indoor or outdoor staff of either
company who is concerned with the management of
                                                             Member States shall amend their national provisions
claims or with legal advice in respect thereof may at
                                                             so as to comply with this Directive within 12 months
the same time carry on a similar activity in the other
                                                             of its notification and shall forthwith inform the
company.
                                                             Commission thereof.
                         Article 5                           The provisions thus amended shall be applied within
                                                              18 months of the date of notification.
On each occasion when it is necessary to instruct a
lawyer to represent or defend the interests of a person
                                                                                      Article 10
with legal expenses cover, the latter must be free to
choose his lawyer. The insured person shall not have
the capacity to surrender this right by contract.            Following notification of this Directive, Member
                                                             States shall communicate to the Commission the texts
                                                             of the main provisions of the laws, regulations or
                         Article 6                           administrative provisions adopted by them in the field
                                                             covered by this Directive.
Member States shall adopt all appropriate measures
to ensure that legal expenses insurance policies
provide for an arbitration or equivalent procedure                                    Article 11
whereby, where there is a difference of opinion
between a legal expenses insurer and his client as to        This Directive is addressed to the Member States.