What is Legal Expenses?
A simple definition:
Legal expenses, also known as legal protection insurance, is taken out by individuals or companies for protection against defending civil and criminal actions brought about by the other individuals or companies or alternatively to pursue them where legal expense will be incurred.
The 3 main basic types of legal protection are Personal or Family, Motor and Commercial. Please click on the cover type for more information.
With changes to the Civil Justice System, and the withdrawal of legal aid for all but the minority, there has never been a more important time to ensure that the necessary legal expenses insurance is in place in order that ‘access to justice’ is available for everyone.
Enforcing your legal rights can be a daunting, complicated and stressful business, as well as being expensive; this often deters people from bringing a legal case, and as such they lose out.
Household contents insurance does not normally cover consumer disputes or personal injury claims. Legal expenses insurance added on to a household policy would typically cover the policyholder for consumer disputes, employment disputes, neighbour disputes and legal advice to name but a few.
Having a road traffic accident can be distressful enough, without the worry of being financially burdened as a result. Many consumers believe that their motor insurance gives them complete cover however this is not the case even if you have Comprehensive Insurance, you may still suffer financially after an accident that wasn’t your fault.
Motor Legal Expenses Insurance (Uninsured Loss Recovery) covers the costs for a solicitor or other suitably qualified expert to pursue a claim against a negligent Third Party of the ‘uninsured losses’, which can include, but is not limited to Personal Injury Compensation, Policy Excess, Loss of Earnings and Alternative Transport Costs.
With nearly 33 million vehicles on the road, causing 220,000 injury accidents (source Department of Transport 2007), the need by drivers for suitable legal representation during a road traffic accident is greater than ever.
Businesses are now exposed to a minefield of legal changes covering a wide range of issues. Unless a company has in house legal expertise it can be very expensive to ensure compliance on all issues and can place considerable strain on the resources of smaller businesses.
Keeping up with developments is now a full time job, and for those businesses who have the finances for their own in house Human Resource and Legal Departments, these never ending legislative changes can be managed and implemented. However, as there are 4 million businesses operating in the UK, with 99.9% of these being Small to Medium Sized Enterprises (SME's), it is unlikely that the majority of SME's will have such a luxury, or the available funds to cover legal disputes as they arise. Source: Department of Trade and Industry 2007
Legal fees, compensation awards and tax enquiry fees can all undermine the financial stability of a business. In this litigious climate, a Commercial Legal Expenses policy is essential to protect a business against the potential legal costs they may face the typical areas of cover would be employment disputes, health and safety, taxation, prosecution defence, property disputes and contracts to name but a few.
Over the last 30 years legal expenses insurance has developed into many forms, the main difference being how they are sold. Legal protection insurance policies are mainly sold Before the Event (BTE) through brokers, insurance companies and affinity groups and After the Event (ATE) through solicitors.
The policy types above are explained below:
Before the Event
This is usually sold as an add-on to a household or motor insurance policy. It covers the consequences of an event which has not yet occurred.
After the Event
This type of insurance is taken out after the event has occurred to insure you against the risk of losing your case. It is also referred to as ATE Insurance, Conditional Fees Insurance, CFA insurance, Post-Event Insurance, AEI or Legal protection insurance. For details of our ATE policy please click here.
Legal expenses is usually sold through a scheme but can be sold as a stand alone product although Allianz Legal Protection only provide cover on a scheme basis. A scheme is an arrangement with an intermediary to distribute legal protection products on the insurer’s behalf to the end customer. If you want to take out legal expenses insurance please contact your current insurance advisor, company or broker for advice.
Regulation
Legal expenses insurance is subject to Financial Services Authority (FSA) regulation and subject to the rules of the Financial Ombudsman Service and The Insurance Companies (Legal Protection Insurance) Regulations 1990.
