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Policy Matters - Commercial Legal Expenses Insurance
Policy Matters - Article 3
We have already said, in the previous articles, that businesses have to operate in an increasingly complex environment and in recent years there has been a relentless rise in the volume of business legislation from both the UK and Europe.
There is also an increasing public awareness of legal rights and a new willingness to take legal action against companies. This means legal disputes can occur without warning, which costs your company both time and money.
This continual increase in the amount of business legislation makes it difficult for any business to keep up with the changes. A company should protect its legal rights as the current cost of taking legal action can cause serious financial problems and sometimes force a company out of business. Even a straightforward Employment Tribunal or tax enquiry can cost thousands of pounds.
Small to medium sized enterprises are unlikely to have the in-house resources to deal with these and are consequentially most at risk. A Commercial Legal Expenses insurance policy protects against the cost of potential commercial legal disputes and includes the legal advice and representation which businesses need to minimise their exposure to these risks.
A Commercial Legal Expenses policy will enable you to pursue or defend your legal rights in many business situations including employment disputes, contract disputes, tax enquiries, property protection and debt recovery.
The risk of a claim from an employee, ex-employee or even potential employee is the driving force behind many companies’ need for commercial legal expenses insurance. Legislation like the Employment Act 2000 introduced new rights for part-time workers, parental and maternity leave. The Working Time Regulations and National Minimum Wage Act have also increased employee rights.
All this requires employers to check and in many cases amend their policies and procedures to remain within the law and to keep up to date often requires the help of a lawyer.
This is where the benefits of legal protection policies kick in. Standard cover includes Employment Law, Tax Protection cover, Legal Defence and Property Disputes with extensions like Contract Dispute and Debt Recovery being available.
In the early days, commercial legal insurance concentrated on stepping in to finance claims when they occurred.
Now, as the market develops, insurers are increasingly offering risk management tools to reduce the likelihood of their policyholders becoming involved in a dispute. These may take the form of business advice services, providing detailed guidelines on matters of employment, tax and debt recovery.
By providing legal advice through a telephone helpline service, insurers enable the policyholder to obtain up-to-date information on the law and how it affects their individual circumstances.
The lawyers providing this explain what action a policyholder can or should take under the law to pursue their case or to comply with requirements under new legislation.
Editors Insurance Comment
The usual approach taken by businesses towards litigation protection is through a ‘comprehensive’ Legal Expenses insurance policy which embraces not only employment protection but also aspects such as Tax, Property and Contract disputes.
Protection levels tend to be lower under this type of contract and the policy warranties and management requirements are much more onerous than under the aforementioned Directors & Officers or Employment Law Protection policies. They do however offer what is often a much more affordable alternative form of cover.
With these types of insurance policies there are often huge differences in cover offered by insurers. Many exclude disputes involving the small claims fast track system. But others provide costs incurred in presenting such a claim.
Whatever policy you choose you should be prepared to work within the contract warranties and conditions as failure to do so could leave you feeling disappointed at the time of a claim.
For more information on the topic covered by this article please contact Richard Rampley via email or phone 01223 720 322.
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