Legal expenses insurance
Legal expenses insurance (LEI), also known as legal protection insurance (LPI) or simply legal insurance, is a type of insurance which covers policyholders against the potential costs of legal action brought against the policyholder by another individual or institution. There are two main forms of such insurance, before-the-event and after-the-event ("the event" being some eventuality which triggers legal action). Most legal insurance plans and systems are before-the-event, though both are common in some jurisdictions such as the United Kingdom. In the United States, the concept is most often called pre-paid legal services (PPL or PPLS). Some specialized forms of LEI include various sorts of professional liability insurance, such as malpractice insurance for medical practitioners, errors and omissions insurance for consultants, agents and brokers of various sorts, and directors and officers liability insurance for principals and supervisory officers of corporations and other organisations.
Legal expenses insurance provides more affordable coverage for the legal fees charged (including expenses incurred) by a lawyer or law firm representing the policyholder in usually unforeseen legal matters. These can include employment disputes, litigation, disciplinary actions, human rights complaints and criminal charges. Coverage is generally not discretionary; if the claim is covered within the governing terms and conditions of the policy, the policy responds. In addition to liability insurance against certain kinds of legal liability, legal expenses insurance can also offer coverage for predictable events such as the drafting of a will or power of attorney, and simple legal advice.
In the UK
Before- and after-the-event insurance
Before-the-event (BTE) insurance, is taken out by those wishing to protect themselves against potential litigation costs that could be incurred following a usually hypothetical future event. These costs often include fees of solicitors, barristers and expert witnesses, court fines and fees, and any legal costs awarded to the other side. Before-the-event insurance is generally paid on an annual basis to an insurance company. It is often sold as part of a home or auto insurance package, and is also sometimes offered as a benefit to members of a trade union or association.
After-the-event (ATE) insurance is taken out after an event, such as an accident which has caused an injury, to insure the policyholder for disbursements, as well as any costs should they lose their case. After-the-event insurance is usually used by people who do not have before-the-event insurance. If the policyholder loses the case, then the insurance company will pay the opponent's legal costs and expenses, as well as the policyholder's own disbursements. Solicitors who take on, for example, personal injury cases on a "no win no fee" basis, may require their clients (whether defendants or plaintiffs) to take out after-the-event insurance so that costs will be covered if the case is lost. The premium payments, especially in a "no win no fee" arrangement, may be deferred until the conclusion of the case; thus in most cases the premium itself is self-insured. This insurance is often offered by solicitors and claims management companies . Where the ATE insurance policy was incepted before 1 April 2013, its cost will often be recoverable by the successful party from the losing side as part of an award of costs. Where the ATE insurance policy was incepted on or after 1 April 2013, its cost will not be recoverable by the successful party from the losing side. The cost of BTE insurance is never recoverable as part of an award of costs.
Lack of awareness
Research by the UK Ministry of Justice in October 2007 found that despite 59% of the UK population actually having some form of legal expenses insurance (whether they knew it or not), fewer than one in four consumers had ever heard of before- or after-the-event insurance. The research estimated that 28 million British adults have before-the-event insurance in particular, most as an add-on to another insurance policy.
In Québec, a program has been successful because it was both endorsed and promoted by Québec's law society (bar association), Le Barreau du Québec. Outside that province the concept is less well-known, although multiple legal insurance providers operate in the country (some native, some U.S.-based).
Special Bill C-45 coverage for municipal governments is also essentially a form of LEI.
- "12 No-win, No-fee Actions". CommunityLegalAdvice.org.uk. London, UK: Community Legal Advice, Legal Services Commission). October 2006. p. 6. Archived from the original on 15 January 2010. Retrieved 8 June 2011.
- "Frequently Asked Questions - Civil Litigation - Conditional Fees". DCA.gov.uk. London, UK: Department of Constitutional Affairs. 2004. Archived from the original on 17 January 2009. Retrieved 8 June 2011.
- s.58C(1) Courts and Legal Services Act 1990, as inserted by s.46(1) Legal Aid, Sentencing and Punishment of Offenders Act 2013
- "Research Shows Low Awareness of Before the Event Legal Expenses Insurance". Justice.gov.uk. London, UK: Ministry of Justice. 27 October 2007. Retrieved 9 June 2011.