Covering the cost of legal action

Thursday 20 May 2010

Legal Expense Insurance (LEI) is a type of insurance policy which covers the costs involved in potential legal action; it can cover the cost of instructing a solicitor and protect you against any costs awarded against you. Many people have LEI without even realising it or are unaware of the extent of the coverage it provides.

Research carried out by the Ministry of Justice in 2007 revealed that less than one in four consumers had even heard of LEI. Despite this, it is estimated that around 28 million adults in the UK (almost 60% of the population) do actually have LEI cover in place, and without them knowing.

As well as being available on a stand-alone basis, LEI is commonly included as an additional benefit on some motor and household insurance policies, as well as some credit cards. It is usually included free or is available for a small additional sum (typically less than £30.00). Some Insurers automatically add the cost of the premium to your quote or renewal and will only remove it if you specifically ask them to. However, the small cost involved may prove to be money well spent if you find yourself wanting to start a legal action.

LEI is often available for a wide spectrum of disputes, including property disputes, consumer claims, employment disputes and personal injury.  As well as covering your own solicitor’s costs it will provide cover for your opponent’s legal costs in the event your claim is unsuccessful.

If your policy does not contain LEI, you may wish to raise this with your Insurance Company or Broker and obtain a quote for ‘adding on’ this benefit, but be aware that there may be a deferred period within which no claims can be made. For maximum cover it is worth having LEI on both your household and motor insurance policies.

It is important to check your policies at the outset of any claim to ensure your costs are covered. Your insurers are unlikely to pay for any legal costs you incur before reporting the claim to them.

There may also be a time limit on making a claim under your insurance policy, so you must act fast. We can assist with checking insurance policies and making the appropriate initial enquiries with your insurance company, usually at no cost to you, to find out the cover you have.

Whilst your insurance company may have a preferred panel of solicitors to refer your case to and ask them to act for you, it is often possible to instruct solicitors of your choice instead, particularly when the issue of proceedings is the next step.

The type of policy described above is known as ‘Before the Event’; the insurance is taken out in case something happens in the future, that is, before an event has happened. There is also a type of policy called After the Event (ATE) Insurance, which is taken out after the incident has happened and this provides similar cover insuring you against your opponent’s costs.

The premium for ATE cover is usually more expensive but many insurers offer deferred premiums which means that the premium does not have to be paid until the case concludes successfully. If your case is successful, your opponent will normally reimburse the cost of the policy. Most ATE policies where the premium is deferred will not require the premium to be paid by you if your claim is unsuccessful. We can obtain an appropriate ATE policy on your behalf, if required.

In addition to checking your insurance policies for legal expense cover before commencing any legal action you should also check if you can get free legal advice if you are a member of a trade union or other professional body. You may be entitled to a public funding certificate (formerly Legal Aid) but the categories of cases which qualify are restricted. We would always check this with you.

Even if you are not at present thinking about pursuing a legal case, it would be prudent to check your insurance policies or contact your insurance company or broker to ascertain if such a benefit is available and what the premium would cost. To take these steps now will be time and money well spent, providing the financial assistance for your legal action and protection against any potential award against you for your opponent’s costs in the event of your action not being successful.