Order on Legal Expenses Insurance for Group 1 Insurance Undertakings¹)

Pursuant to Sections 71, 132, paragraph 2, and 316, paragraph 1, of Act No. 718 of 13 June 2023 on insurance business, the following is enacted:

Scope of Application

Section 1. This Order applies to Group 1 insurance undertakings conducting insurance business within insurance class 17 in Annex 1 to the Act on insurance business.

Paragraph 2. The Order does not apply to:

1) Legal expenses insurance linked to disputes or risks arising from the use of seagoing vessels, or connected with such use.

2) The business conducted by a liability insurance company in connection with the insured's defense or representation in any legal proceedings, including any legal advice covered by the insurance coverage, insofar as this business is conducted simultaneously with the handling of the insurance company's own interests under this coverage.

3) The legal expenses insurance conducted by an insurance company offering assistance, provided that the following conditions are met:
a) The business is conducted in a country other than the European Union where the insured has their permanent residence, b) The business forms part of an agreement concerning only assistance to persons encountering difficulties during travel or while away from their home or usual place of residence, and c) It is clearly stated in the agreement that the coverage in question is limited to the matters referred to and is accessory to the assistance coverage.

Section 2. In this Order, "legal expenses insurance" means insurance whereby an insurance company, against payment of a premium, undertakes to cover costs associated with legal proceedings and to provide any other services resulting from the insurance coverage, inter alia with a view to obtaining compensation for the damage suffered by the insured, either through settlement or during civil or criminal proceedings, as well as to defend or represent the insured during a civil, criminal, or administrative proceeding or similar matter, or in connection with claims brought against them.

Separate Agreement or Chapter

Section 3. An insurance company must enter into an agreement on legal expenses coverage via a separate agreement relative to the other insurance classes or via a special chapter in a single policy, specifying the scope of the legal expenses coverage.

Handling of Claims

Section 4. An insurance company must, when handling legal expenses insurance claims, use one of the following methods:

1) The insurance company ensures that no employee involved in the handling of legal expenses insurance claims or in legal advice related to such handling simultaneously engages in a similar activity within another insurance class in the company or in another insurance company that has financial, commercial, or administrative ties to the company, and which conducts insurance business within one or more other insurance classes covered by Annex 1 to the Act on insurance business.

2) The insurance company entrusts the handling of legal expenses insurance claims to a legally independent company. If this company is affiliated with another insurance company conducting insurance business within one or more insurance classes covered by Annex 1 to the Act on insurance business, the employees of the independent company involved in handling damage claims or legal advice related to such handling must not simultaneously engage in the same or a similar activity in the other insurance company.

3) The insurance contract stipulates that the insured may entrust the defense of their interests to a lawyer of their own choice when the insured has a claim under the contract.

Paragraph 2. If the method in item 2 is used, the legally independent company must be specified in the separate agreement or special chapter, cf. Section 3.

Free Choice of Lawyer

Section 5. Every insurance contract regarding legal expenses must contain an explicit provision stating that the insured may freely choose their lawyer in the following situations:

1) When it is necessary to defend, represent, or safeguard the insured's interests in a legal proceeding or in connection with any legal advice covered by the insurance.

2) When a conflict of interest exists.

Disputes with the Insurance Company

Section 6. Every insurance contract regarding legal expenses must contain an explicit provision stating that the insured has the right to have a dispute with the insurance company resolved by the Insurance Appeals Board (Ankenævnet for Forsikring).

Conflict of Interest

Section 7. In the event of a conflict of interest, or if there is disagreement regarding the resolution of the dispute, the insurance company must inform the insured of the right to freely choose a lawyer, cf. Section 5, and of the possibility to have the dispute resolved by the Insurance Appeals Board, cf. Section 6.

Penal Provisions

Section 8. Violation of Sections 3-7 is punishable by a fine.

Paragraph 2. Companies and other legal entities may be subject to criminal liability according to the rules in Chapter 5 of the Criminal Code.

Entry into Force

Section 9. This Order enters into force on 1 January 2025.

Paragraph 2. Order No. 1259 of 27 November 2017 on legal expenses insurance for Group 1 insurance undertakings is repealed.

Danish Financial Supervisory Authority, 5 December 2024 Louise Mogensen / Line Bergmann

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¹) The Order contains provisions implementing parts of Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2014 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II), Official Journal of the European Union 2009, No. L 335, page 1.

Official Gazette A
2024 Published on 19 December 2024
5 December 2024. No. 1605.
Ministry of Industry, Business and Financial Affairs, Danish Financial Supervisory Authority, file no. 24-019439 CQ003080