Choosing Legal Expense Insurance
What is Legal Expense Insurance?
Legal Expense Insurance (“LEI”) is a form of add on cover at an additional cost to your normal building, contents or motor insurance which will provide you will an amount to cover legal costs (your own and the opponents) in certain types of legal disputes. It may also be a benefit of premium bank accounts.
Each policy is slightly different depending on the insurer and cover provided.
Why is it important?
In recent years there has been a huge challenge on how the average person can afford legal services.
Legal aid has been eradicated from most areas of law.
Success fees and insurance premiums are no longer recoverable from the opponent and so makes it more difficult for firms to offer No Win No Fee arrangements. This also means that your compensation is reduced by having to meet these cost yourself.
Third party funders are likely to require a substantial cut of your compensation and only willing to consider cases worth a significant amount.
The average person is highly unlikely to be able to privately fund a case all the way to a final hearing where costs can escalate into tens of thousands of pounds or more.
Important Considerations
- Price of the premium – this is usually fairly modest but may reflect the amount of cover provided
- Cover provided – check how much cover (usually £50,000 to £100,000) is available and whether this needs to cover your own legal costs as well as the opponent’s legal costs
- Type of disputes covered – typically this will include personal injury, employment, contractual (including professional negligence), and property disputes but some policies have wider remits like criminal matters.
- Prospects of success – most policies will only provide cover if prospects are 51% or over, although some policies may require a higher percentage (such as 60%)
- Exclusions – you should check these carefully. Generally cover is not valid for claims/events which arose prior to the policy.
Can you choose your own solicitor?
Another important consideration when choosing LEI is whether it will allow you the freedom to choose which solicitor to instruct, although this will still depend on whether your chosen solicitor is prepared to accept the terms offered by the insurers (such as hourly rates).
Some policies will dictate that you can only use a firm of solicitors on their panel.
The Financial Ombudsman Service have provided the following guidance:
a policyholder should be allowed to choose their own solicitor from the point that legal proceedings need to be started – ie when negotiations have failed and it has been decided, by the solicitors involved, that it will be necessary to issue proceedings to progress the legal case.
In contrast a policy holder will only be able to appoint their own solicitor from the start of the claim in ‘exceptional circumstances’, for example conflict of interest, complexity, expertise/knowledge.
It is possible to change from a panel solicitor to your own solicitor once it has becomes necessary to issue proceedings, or a client may decide to pay their chosen for the initial work until their insurance policy kicks in.
Final Words
If you have the choice and it is affordable, I would always advise a client to take out LEI and in fact many clients have it without realising. But choose wisely as not all policies are equal or you could come to regret it later on when you do need to call upon the policy.
The benefits of a LEI policy far outweigh the costs and you never know when it will come in handy for those unexpected legal disputes.
If your policy will not allow you to choose your own solicitor, do not take their word for it and get advice about whether you have the right to exercise your freedom of choice for legal representation.
If you are in need of specialist legal advice regarding your policy call our highly experienced dispute resolution experts on 0808 271 9413 who will be able to assist. Alternatively, you can request a call back online.