How does legal-expenses insurance work?
There are two basic types of legal-expenses insurance. They are called 'after-the-event' and 'before-the-event' insurance and they work in different ways.
An after-the-event policy is for when you are already in a dispute, and you need to cover your disbursements and the risk of having to pay the other side's legal bill if you lose your case. You solicitor will have to send regular reports on the progress of your case to the insurance company providing the policy, especially any offers by the other side to settle your claim.
A before-the-event policy is usually sold with other insurance (for example, car insurance or house insurance). You cannot generally buy it to cover you for a problem you already have. If you have this kind of insurance to cover your legal costs, you may not need to enter into a conditional-fee agreement.
The cover provided by this type of insurance varies but it will often pay for:
- your solicitor's fees and expenses;
- costs for expert witnesses;
- court fees; and
- your opponent's legal costs.
However, it won't cover any compensation you are ordered to pay if you lose your case.
Also, before-the-event insurance covers you only for certain types of legal problem and your insurer will not necessarily take your case on, which is why it is important to get advice. If you want to use this type of insurance to cover your legal costs, you need to be aware of several conditions:
- In most cases, you must report the incident that your case is about within six months of it happening, though this time limit is shorter with some policies.
- Most policies say you can choose your own solicitor, but only if legal proceedings have already started. At any earlier stage the insurance company can refuse your choice of solicitor without giving any reason. Your solicitor will advise you how to persuade the insurance company to let you use the policy and choose who will act for you. If it refuses, your solicitor may still be able to act for you under a no- win, no-fee agreement.
- Most policies say that once the case has started you must accept any reasonable offer from your opponent to settle. If you don't accept an offer, you may no longer be covered by the insurance, and if you wish to continue with your case you will have to make other arrangements to pay the costs from that point.
- There may well be a limit on the amount of legal expenses that the policy will cover (for example, £25,000). If you reach that limit (which might be for both your and your opponent's costs) and your case has not yet finished, you may have to pay out of your own pocket to finish the case. Alternatively, you may be able to increase the limit by paying an extra premium.
If you have car insurance, home contents insurance or a credit card, you can often buy legal-expenses insurance as an 'add-on' or it may be included with the policy or card. If you have to pay for it, it should cost you between £10 and £50 a year. It will usually cover you for:
- personal injury (if you or a family member are injured or killed due to someone else's negligence);
- employment issues (for example, if you are dismissed unfairly, or injured at work);
- a consumer problem relating to a contract to buy or hire goods and services;
- loss or damage to your property that was someone else's fault;
- disagreements with neighbours about things like boundaries or noise;
- tenancy disputes if you live in a rented house or flat; and
- contract problems with buying or selling a house or with non-structural building work (redecoration, for example).
If you have a before-the-event policy, you may also be able to use it for problems that your family members have.
But you should always check first whether the insurance will cover any problem you want to take legal action over.
Add-on insurance normally won't cover disputes relating to:
- problems with government organisations (your local council, for example);
- slander or libel;
- the amount of an insurance claim; or
- a problem about a will or inheritance.
Most trade unions offer free legal assistance for certain disputes. These are mostly work-related disputes, but trade unions are now more often willing to help with other disputes too, so it is worth asking your union representative to see if the union could help pay for your legal case. Many trade unions offer legal services to a member's husband or wife, partner and other close relatives as well as to the member.
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