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Peter Callens

"Simpler, more equitable and more neutral? Is that why legal expenses insurance should be shaken up?"

In this column, our chairman reflects on current affairs. You will read it every fortnight. Find out what he wants to talk to you about today.

One newspaper not known for its frenzied humour is the Belgian Official Gazette. That newspaper published the law of 22 April 2019 'to make legal expenses insurance more accessible' in its nonetheless imperfect edition of 8 May 2019. That law introduced a tax rebate for those who take out new-age legal expenses insurance.

The law ploughed deep into the minds of those who were active in the Bar at the time. The long deliberations on what that law was or was not supposed to do, mainly around the nomenclature of benefits and fees that were eligible for insurance coverage, are among the indelible achievements of those involved in the preliminary discussions. Or at the wrangling over them and altercations against a background of weeping and gnashing of teeth. Not everyone looks back to that period with equal nostalgia.

Then Justice Minister Koen Geens was the big advocate of the law, which came into force on 1 September 2019. From now on, policies had to cover a wide range of risks: liability, criminal law, tax law, administrative law, labour law, contract and consumer law including construction disputes, inheritance, gift and will law, divorce and family law. Especially the coverage of disputes in construction cases and divorce cases received outsized acclaim. All the more so because these disputes occur with people who are financially disadvantaged because of the dispute situation. Having insurance for lawyers' fees then provides solace.

There is something genial about the law's approach. It improves access to justice by reducing costs for the policyholder seeking justice. It simultaneously creates a tax advantage for the latter. Although this advantage leads to lower tax revenues, in the event of the policy's success this shortcoming is more than compensated by higher tax revenues thanks to the increased revenues of lawyers and insurance companies. At the same time, the scheme provides a buffer against raising the income limits for access to second-level assistance, so there is less expenditure in store for the government. It is an archetypal win-win: for the government, for the litigant, for the insurance industry and for the legal profession.

And indeed, in Het Laatste Nieuws of 22 July 2017, Minister Geens - even then - noted, "Middle-class people who do not qualify for a pro bono lawyer, but still do not have sufficient financial resources to pay for proceedings, will certainly benefit from this insurance." He added: "Many people with problems do not dare to go to a lawyer because they think they will not be able to pay him. I want to change that by making legal expenses insurance tax deductible. From 2018, this will be possible."

Legal expenses insurance already enjoyed an exemption from premium tax, but that was insufficient to increase the attractiveness of the policy. The explanatory memorandum explains that the proposers of the bill therefore intended to replace that exemption with a tax reduction on premiums for legal expenses insurance that would meet the law's conditions on covered risks, minimum coverage and guarantee, and waiting periods.

Did the new policy have the hoped-for success? In his answer to a parliamentary question by MP and confrere Olivier Vajda (Ecolo) on 15 September 2022, Justice Minister Vincent Van Quickenborne gave some figures. These indicate that in 2019, there were 35,063 policies in force for the discussed legal expenses insurance. That number rose to 67,910 policies in 2020 and 106,893 in 2021. Not negligible figures.

Where is this legal expenses insurance to go now? Quo vadis, policy?
- Peter Callens, chairman

The fashion of framing a cabinet's policies in a newfangled trinity has also taken root in the Finance Department. There, it is called that the tax system should become "simpler, more equitable and more neutral". At least that is the motto according to Finance Minister Vincent Van Peteghem's brochure 'First phase of broader tax reform'.

In it, the minister writes: "Over the years, the tax note has evolved into a complex entity with numerous coteries. Often due to tax expenditures that few enjoy, but which complicate the tax note for everyone."

You can feel it coming. The finance minister does not write it explicitly, but persistent reports from very well-informed sources confirm that the legal expenses insurance tax credit... is to be scrapped, four years after its introduction. This abolition is part of the 'simplification' of tax returns. Simplification is the word used in tax newspeak to describe the withdrawal of a tax benefit.

Pity for those with policies and counting on the tax benefit. Pity for the energy put into the project. Pity also for insurers who will see policies cancelled. And too bad for the increased threshold to Justice. It was potty-mouthed, apparently.

But perhaps my usually well-informed sources are less informed than usual. Maybe it's a crock. Hope springs eternal. The Belgian Official Gazette may not have to be a source of humour, but neither should it become a source of gallows humour.

With affectionate regards,

Peter Callens