How insurance can protect your firm against legal costs
Starting and indeed running a business can be both rewarding and challenging in these uncertain times. There are many legal and other pitfalls that can beset a growing business, including non-payment of a debt by a customer, contractual disputes with customers, suppliers or agents, employment disputes, and regulatory investigations.
Dealing with such issues can divert time and resources from your business and worse, could expose the business to legal costs, which in the event legal action is unsuccessful and factoring in the risk of the opponent's costs or adverse costs, can be considerable.
Is there any way of protecting my business from exposure to legal costs, I hear you ask? The short answer is, yes, a form of insurance exists which can prove invaluable when legal issues arise.
Legal expenses insurance or 'LEI' is an insurance policy which will pay your legal costs and/or adverse costs in certain circumstances, and is an insurance option that merits consideration.
Commercial legal expenses insurance can insulate your business against the risks of legal costs and provide direct access to specialist legal advice when required.
Such policies will indemnify cases where there are reasonable prospects of success or recovery and can remove the potential financial stress which is often associated with the decision to embark on litigation or when defending litigation instigated by another party.
Such policies will often cover employment advice & representation and even compensation awards; criminal or regulatory investigations into business practices, trading standards investigations, health & safety prosecutions, property protection, legal defence and statutory licence appeals. Many businesses require a statutory licence in order to trade; those businesses involved in transport, waste management, require such licence and any interference or curtailment of the licence can attract LEI cover.
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Moreover those businesses whose conduct is regulated by a professional body may similarly be able to avail of LEI. Indeed some professionals particularly those in the medical profession regulated by the HCPC, might also be able to rely on LEI if disciplinary investigations are commenced by the Professional body.
If your business does not already hold a pre-existing LEI policy, an After the Event (ATE) policy may be applied for, to cover the legal costs of a particular case.
We are often consulted by business start-ups and alongside general advice on company formation, shareholder agreements etc we will often advise legal expenses is considered at the outset.
Worthingtons Solicitors have considerable experience of representing clients under the cover of legal expenses insurance and can assist with reviewing your company's policy documents and applying for an indemnity for your case under your LEI policy, or assisting with an application for ATE Insurance.
*Nikki McConnell is a Partner in the Litigation Department of Worthingtons Solicitors. www.worthingtons law.co.uk