Commercial Legal Expenses Insurance
Commercial legal expenses pays the legal costs of running or defending the disputes a business ends up in: an employment tribunal, a contract argument, a property dispute, an HMRC enquiry, or a prosecution following a health and safety incident.
What Legal Expenses Covers
It is inexpensive, it is often bundled into a package policy, and it is routinely bought without being read. The two things worth knowing before you need it are that the insurer usually chooses the solicitor, and that cover only applies where your case has a reasonable prospect of success, which in practice means better than even odds.
That second condition is not unreasonable, but it does mean this is not a blank cheque to pursue a dispute you feel strongly about. It funds cases that are likely to be won.
What Commercial Legal Expenses Insurance Covers
Employment disputes and tribunals
Defending claims from employees and former employees: unfair dismissal, discrimination, wages. The most frequently used section by a wide margin, and most policies include access to an employment law helpline that is worth more than the cover itself if used early.
Contract disputes
Pursuing or defending disputes over contracts for goods and services, usually above a minimum value and subject to the prospects of success test.
Debt recovery
The legal cost of chasing undisputed invoices. Note that it funds the recovery action and does not guarantee you receive the money, which depends on whether the debtor has any.
Tax and VAT enquiries
Professional fees for representation during an HMRC compliance check, enquiry or dispute. It covers the cost of defending the position, not any tax, interest or penalty found to be due.
Statutory licence and property disputes
Appeals against the refusal or revocation of a licence your business needs, and disputes over the premises you occupy.
Criminal defence and HSE representation
Legal representation where the business or a director is prosecuted, including following a health and safety incident. It pays for the defence, not for any fine imposed.
Where The Cover Stops
Wordings differ between insurers, so treat these as the usual position rather than as universal fact. Where one of them matters to you, it is worth checking on your own schedule before you need to.
The prospects of success test
Cover applies only where the insurer's assessment is that the case is more likely than not to succeed, commonly expressed as better than a fifty one per cent prospect. A case that falls below it is declined, and the assessment is made by the insurer's appointed adviser rather than by you.
The insurer appoints the solicitor
Most policies use a panel firm, and the right to choose your own normally only arises once proceedings are formally issued. If you instruct your own solicitor before telling the insurer, those costs are usually not recoverable.
Events before inception
Disputes arising from something that happened, or that you were aware of, before the policy started are excluded. Buying cover once a dispute is brewing does not work.
Fines and penalties
Court fines, HSE penalties and tax found to be owing are not insurable. The cover pays for representation only.
Failure to follow advice
Employment cover in particular is usually conditional on having used the helpline and followed the advice given. Dismiss somebody without taking the advice and the insurer may decline the tribunal defence.
The Helpline Is The Valuable Part
Nearly every commercial legal expenses policy includes a telephone advice line covering employment law, health and safety, tax and general commercial matters. It is usually unlimited, available before anything has gone wrong, and it is the part of the cover most people forget they have.
On employment matters it tends to be the difference between a problem and a claim. A dismissal handled on advice, with the process documented, is a tribunal defence that holds up. The same dismissal handled on instinct is the one that settles.
It also matters because many policies make the employment section conditional on having taken and followed that advice. So the helpline is not simply a benefit sitting alongside the cover, it is often the thing that keeps the cover in force.
What The Prospects Of Success Test Means In Practice
Insurers will fund a case they expect to win. The assessment is normally made by their panel solicitor, applying a better than even chance standard, and it is reviewed as a case develops rather than decided once at the start.
The consequence is that a dispute where you are clearly in the right, with documentation, is funded straightforwardly. A dispute that rests on a verbal agreement, or where your own paperwork is thin, often is not. Insurers are making a commercial assessment, not a judgement about fairness.
If cover is declined on prospects, most policies allow you to challenge it, usually by obtaining a counter opinion from a barrister at your own cost, refundable if the opinion goes your way. That route is rarely used and is worth knowing about.
Where It Sits Against Your Other Policies
Legal expenses fills gaps rather than duplicating cover. Your liability policies already pay to defend claims for injury and damage, and that defence cost usually sits outside the limit. Legal expenses picks up the disputes those policies do not touch: employment, contract, tax, property and licensing.
There is one overlap worth checking. Where an incident produces both a civil claim and a prosecution, the liability insurer handles the civil claim and the legal expenses policy may handle the criminal representation. Telling both insurers promptly avoids an argument about who is running what.
For most small businesses the cover is bundled into a commercial combined or shop package for a modest additional premium, which is usually the sensible way to buy it.
What Moves The Price
We do not publish a starting price for this cover, because a figure that is not drawn from a policy we actually placed is worth nothing to you. What we can tell you is what the premium is built from.
- Number of employees, which drives the employment exposure
- Turnover and the sector you trade in
- The limit of indemnity, commonly £100,000 per claim
- Whether tax enquiry cover is included
- Claims and disputes in recent years
- Whether it is bought standalone or inside a package
We are a broker, so we take it to several insurers rather than quoting one. Call 02382 000820 and you will have a real figure rather than a range.
What We Need To Quote
- Number of employees and annual wageroll
- Annual turnover
- Whether you want tax and VAT enquiry cover included
- Any dispute, tribunal or investigation currently live or anticipated
- Any legal disputes in the last five years
- Whether the business holds licences it depends on
Cover that often goes with this
The gaps we most often find sitting next to this policy.
- Employers' liabilityInjury claims from staff, which this policy does not cover and that one does.
- Commercial combinedWhere legal expenses is usually bundled, for a small additional premium.
- Cyber insuranceData breach response, which needs its own legal and notification cover.
- Tradesman insuranceThe trade version of this, with tools and van cover built around it.
- All trades A to ZCover written for your specific trade rather than the general product.
- Talk to a brokerTell us what you do and we will say which of these you actually need.
Common questions
Will legal expenses insurance pay for any dispute?+
No. Cover applies where the insurer assesses the case as having a reasonable prospect of success, usually better than an even chance. Cases below that threshold are declined, and the assessment is made by the insurer's appointed solicitor.
Can I use my own solicitor?+
Usually only once formal proceedings are issued. Before that most policies require you to use a panel firm. Instructing your own solicitor without telling the insurer first normally means those costs are not recoverable.
Does it cover fines from the HSE or a court?+
No. Fines and penalties are not insurable in the UK. The policy pays for legal representation defending the prosecution, which is a different thing and is often substantial in its own right.
Can I buy it once a dispute has started?+
No. Policies exclude disputes arising from events that occurred, or that you were already aware of, before inception. The cover has to be in place before the problem exists.
Does it guarantee I will get my money back on a debt?+
No. Debt recovery cover funds the legal action to pursue the invoice. Whether you recover anything depends on whether the debtor can pay, which is a question of their solvency rather than of your insurance.
Other cover we arrange
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