What is Commercial Legal Expenses Insurance?

You will often see Legal Expenses cover mentioned when discussing Commercial Insurance policies, but it’s not always thoroughly explained. Even the most successful and prepared organisations can find themselves suffering from the consequences of a legal dispute.

In fact, it is often when a business is going well that another party decides a claim is worth pursuing.

As you can imagine, as you have found yourself reading this article, dealing with litigation problems certainly isn’t cheap.

From hefty fines to legal representation costs, such disputes can leave a business with a broken bank and damaged reputation. Fortunately, for those who have the foresight to take out insurance policies such as Commercial Legal Expenses cover – these costs can be covered and set you and your business on the road to recovery.

So, what is Commercial Legal Expenses Cover?

This type of policy provides cover for legal costs that occur while pursuing a claim or dispute against a responsible party. The policy is a form of “before the event” insurance, meaning that you must have the policy in place before the event occurs. This is like Professional Indemnity Insurance, which needs to be in place when the work is carried out and still be valid when the claim is made, which can be years later.

This can include:

Contract Disputes – This includes cover for costs of both defending and pursuing action under a contract in the purchase, lease, hire, servicing, testing, maintenance, sale or provision of goods or services.

This is defined as when there has been a disagreement over the terms of the contract by any party in the contract. In some cases, if the dispute concerns money owed, debt recovery may also be included in this policy.

Employment Disputes – Common employment disputes include wrongful dismissal, discrimination, harassment and failure to promote or employ. This can cover your representation costs and the basic compensation awarded.

Personal Injury – This provides protection for pursuing the legal rights of an insured person after an event results in their death or bodily injury. This cover does not include injuries caused by motor accidents.

Property Protection – This regards disputes over ownership of property, tenancy agreements and damage of the insured party’s property. This does not include intellectual property; this cover is for material property such as buildings and contents only.

Compliance and Regulation – This will cover your legal costs against the following:

• Appeals against health and safety enforcement notices, food safety enforcement notices, as well as the cost of dealing with authorities or the Health & Safety Executive (HSE) prior to the charge.
• Appeals against terms of a statutory notice served against you. Also, against the suspension, revocation, imposed alteration or refusal to renew a government-issued licence or certificate of registration for business activity.
• Representation of yourself or an employee at a formal investigation or disciplinary hearing by any trade association.
• Defence in criminal prosecutions or civil legal proceedings against your organisation. This can include disputes or proceedings (including the right to appeal) in relation to the Data Protection Act.

Tax and VAT Protection – This will provide you with cover for legal fees or professional expenses related to representation in the following circumstances:

• Inland Revenue investigations with representation at a first-tier tribunal, upper tribunal or at appeal against a decision following a tribunal
• VAT disputes related to a local review procedure intended to reach an agreement with HMRC, a first-tier tribunal, upper tribunal or VAT tribunal (including an appeal)
• Formal aspects of full enquiries into the personal tax affairs of the organisations’ directors
• Disputes the insured’s compliance with regulations related to Pay As You Earn (PAYE), social security and national insurance contributions after a review by HMRC.

Awards of Compensation – This includes cover for compensation awards following legal proceedings, so long as compensation is awarded through a tribunal, the ACAS Arbitration scheme or is a settlement approved by the insurer.

Claims for compensation are only accepted if they are considered a legal cost and a “reasonable prospect of success” existed for a successful defence throughout the claim.