Does your legal expenses insurer want to settle or buy out your case while you want to continue? First ask what exactly is being proposed. A settlement with the other party and a payment by the legal expenses insurer to discharge its own obligations have different consequences. Only sign once it is clear which rights you are giving up.
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Written by Onur Arslan, attorney at Arslan Advocaten. Onur Arslan practised for many years as a corporate lawyer and insolvency trustee (curator) and has extensive experience in financial law disputes. Do you have questions about your own situation? Get in touch.
Settlement with the other party
A settlement can save time, costs and litigation risk. It can also mean that you drop part of your claim. Ask therefore about the legal prospects, evidential risks, whether the claim can actually be recovered and the consequences of a full and final discharge. An amount cannot be assessed separately from the terms on which it is paid.
Your case handler may recommend a proposal. Whether he can bind you on your behalf depends on the authority granted and the agreements made. Make it clear when you are not yet giving your consent. Also discuss non-financial interests, such as restoring an employment relationship, a home or future losses.
Buyout by the insurer
Some policy conditions give the legal expenses insurer, in certain circumstances, the option of paying the financial interest instead of continuing to provide legal assistance. That is not the same agreement as a settlement with your opponent.
Ask which clause the insurer is relying on, how it calculates the interest and whether related interests have been sufficiently taken into account. A claim can cover more than the original invoice amount. Think of interest, costs, a counterclaim or future obligations. The validity and application of a buyout clause must be assessed in context.
If you assess the prospects differently
A substantive disagreement about litigation, evidence or the reasonableness of a settlement may fall under the disputes procedure (geschillenregeling). Formulate the question as precisely as possible. Why do you consider the proposal insufficient, and which evidence or legal argument do you think the case handler has missed?
The statutory and European rules on disagreements in legal expenses insurance can be found in, among others, Directive 2009/138/EC, Article 203. Your policy partly determines how the independent procedure is organised. A disagreement about the interpretation of a buyout clause may in turn give rise to a separate coverage or contractual dispute.
Continuing yourself after a buyout or negative advice
You can explore whether to continue the case with a lawyer of your own. Have it recorded in advance which costs you will bear yourself and whether the policy still offers any possibility of reimbursement if a more favourable result is achieved later. Such a possibility does not exist in every policy and is often subject to conditions.
Also check what the buyout agreement says about a full and final discharge in favour of the legal expenses insurer. A broad discharge may affect later complaints or claims for costs. Have the main case and the insurance settlement assessed separately for that reason.
Frequently asked questions
Do I have to accept a settlement because the insurer is paying?
Not automatically. The agreements on authority and your interests must be respected. Ask what the consequences of refusing are under the policy.
Is the insurer always allowed to buy out the case?
That depends on the policy conditions and the circumstances. Ask for the legal basis and the calculation.
Can I still litigate after a buyout?
That depends on the agreements made and any discharge granted. The funding of the next steps must also be assessed.
Can Arslan assess the proposal?
We can examine the settlement terms, the buyout clause and the options for further handling of the case.
Read also about second opinions, refusal of the disputes procedure and conflicts of interest.
Have your settlement or buyout proposal assessed before you grant a full and final discharge.
This page provides general information and is not legal advice about your own situation. No rights can be derived from its content.
