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What is business legal expenses insurance?

20/11/2023

Commercial legal expenses can pay your court fees

Business legal expenses insurance A.K.A commercial legal protection insurance, is a handy thing to add on to your business insurance policy.

It might not be big, or glamorous, but good things come in little packages, and it could be that safety net you can’t do without.

So, what exactly do you need it for?

Legal expenses (LE) insurance for business owners provides vital financial and legal protection. From contractual disputes to tax and employment issues, LE helps with those worrisome bills. That means financially, and legally, you’ll be sorted. 

So, if you’re in a dispute with a client, supplier, or former employee, your legal expenses insurance can really save the day. It’s a bit like having a superhero lawyer at your beck and call.   

What does commercial legal expenses insurance cover?

If you own a small business, legal protection insurance should be on your radar. It’ll cover things like solicitors’ and barristers’ fees, court costs, attendance expenses, accountants’ fees, or the cost of an appeal when you’re in a sticky legal situation.

Contract disputes. Contracts are the glue that holds everything together. So, what happens if one party doesn't hold up their end of the bargain? A contractual dispute, that’s what. Luckily, business legal protection can cover legal fees to resolve any messy disagreements.

Employment disputes. Claims of unfair dismissal, discrimination, and employment contract disputes can take the wind out of your sails. But having legal expenses cover will pay to fight your corner.

Tax and Health & Safety investigations. When it comes to the taxman and the health and safety officer, it’s important you play by the rules. But it’s not always that easy. If you find yourself in too deep, guess what’ll be there to dig you out of a hole…

Jury service attendance. It’s our legal duty. But it can be a right pain in the proverbial when it drags on for weeks and you’re losing money. Business legal protection insurance can cover your losses.

What else should I know about business legal expenses insurance?

An important thing to note is that commercial legal expenses insurance providers will only agree to help fight your battle if they think they have a 51% chance (or more) of winning.

Essentially, if you’ve done something wrong and the insurer knows it, they’re not just going to pay out for your mistakes.

Say you’re a builder, and you order materials from a supplier. But the materials never show. And now you’re out of pocket. The supplier won’t return your calls. Or reply to your emails.

It’s pretty clear-cut. You’re owed those materials, or your money back.

But what if it’s a little muddier? If you are the supplier, and you owe a customer, you can’t expect business legal expenses to bail you out, regardless. You’ll need to prove that you’ve got good reason for withholding materials or money and that you’re in the right. Otherwise, your legal expenses won’t cover it.

One more thing. It’s a good idea to call your broker or insurer as soon as you know there’s a problem. Waiting too long can scupper your chances of getting it covered, as the insurer can’t assess whether they have a reasonable chance of winning.

Why is business legal expenses insurance important?

Because legal costs can be astronomical. And most of us don’t have that kind of money going spare. Or the expertise to fight our own legal battles.

When you own a business, disputes are often unavoidable. No matter your size, or how well you run it. So, paying a little each month for legal expenses insurance to back you up makes a lot of sense.

Most commercial legal protection insurance policies include access to a legal helpline that you can call any time for expert advice. Sometimes that’s all you need to avoid things escalating.

If it does come to blows, and a dispute ends up in court, it’ll cover your costs there too.

It’s easy to overlook the importance of legal expenses insurance for businesses. It’s a common misconception that professional indemnity insurance will mop up all your legal fees. But that’s most certainly not the case, so more on that next…

Does other business insurance cover legal fees?

Yes. And no.

Professional indemnity will only cover your legal fees if you’re accused of negligence, breach of confidence, or something along those lines. If someone simply refuses to pay you, without wanting to make a larger claim against you, that’s where legal expenses insurance will act as a lifeline.

As for employers’ liability insurance, it’s a similar story. It’ll only cover you for more serious issues, like personal injury or property damage, for example. Business legal protection insurance is what will help you in a contractual dispute, and with things like unfair dismissal claims.

For things like tax or health and safety investigations, there are no types of business insurance that can help with these matters. Other than legal protection.

How to get business legal expenses insurance

As we said earlier, commercial legal expenses insurance is an add-on. That means it can’t be bought as a standalone insurance.

You’ll need to have professional indemnity, public liability, or employers’ liability insurance in place to add legal expenses insurance to your policy. 

Whether you're just starting out or you've been in the game for a while, adding legal expenses insurance is a smart move. It’ll help protect your business, your finances, and your sanity.

If you have any other questions about business legal expenses insurance, give the team a call on 0345 222 5391.

Image under licence from istock

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