Commercial legal expenses insurance – what is included?
Most business insurance companies include covers automatically within their policies. Usually, these are in a packaged contract, such as pub, shop or office insurance. These package policies are designed to include the sections of cover usually required for the specific area of business. One of the usual covers included, is commercial legal expenses insurance.
Whatever type of business you own, run or are involved in, it is usually prudent to have commercial legal expenses insurance in force. If it is not part of your current insurance cover, you may be able to extend your policy, to include this, or arrange a separate, bespoke, policy. You should discuss this with your business insurance broker.
What about liability insurance claims costs?
Legal expenses is not something that you need to have, to cover legal costs in respect of a claim being submitted under your liability insurance. If you have any of the following, employers, public or product liability, this cover should include costs and expenses in defending you, or your business. Legal expenses insurance is a separate type of cover.
What is covered by commercial legal expenses?
The level and type of cover provided will depend on which commercial insurer provides your cover. Commercial legal expenses is broken down into sections of cover. The main ones provided are:-
Employment defence or disputes
This will provide defence costs at an employment tribunal and may provide certain compensation awards, if made by a court.
If your business is subject to an enquiry (either Full or Aspect) by HM Revenue and Customs or a Pay as you Earn (PAYE) and/or National Insurance (NI) or VAT dispute, some of these costs may be included within the policy.
Damage to property
This covers your legal costs where there is a dispute as a result of damage to your property (including land) where you suffer a financial loss.
Defence of criminal prosecution
This is where a business may receive criminal proceedings, following normal business activities. (this does not cover fraudulent actions, theft or dishonesty)
Commercial tenancy agreement
There may be limited costs for your legal rights under a commercial only tenancy agreement.
Costs may be included where you choose to appeal against the imposition of a statutory notice, which affects your business.
Jury service and court attendance costs
A few insurers do include a limited financial amount, providing certain payments per day that you attend court.
Limited cover may be available, to provide costs to pursue a dispute between your company and a third party.
Restrictions and exclusions
As with all types of business insurance, there will be exceptions to what is, and what is not, covered. You will need to review, in full, your legal expenses policy wording, to see what type of cover you have.
The three main exclusions/restrictions to point out are:-
Choice of legal adviser
Your policy will usually specify that one of the insurers panel of solicitors will deal with any agreed claim. You may have the option to choose your own legal adviser, however this will only be if your insurer agrees a fee scale with them.
Prospect of success clause
A policy will usually state that insurers will only accept a claim if they deem the chances of success to be in excess of 50%.
Commercial legal expenses insurance is based on limits of indemnity. This is the maximum limit of costs, in any one insurance year. A packaged, with this cover included, or bespoke policy, will need to be checked to ensure the limit is sufficient.
Every business will have different requirements, as far as their insurance is concerned. Please discuss your specific needs with an independent business insurance broker.