Commercial Legal Expenses Insurance – just an extra cost or a real benefit

Commercial Legal Expenses Insurance as an addition to a Business Insurance policy may have seemed an unnecessary expense in the past, but a significant rise in litigation is causing an upsurge in the number of businesses requesting cover.

Whilst your Business Insurance policy will generally cover the legal costs and assistance to contest a claim of negligence which has caused damage or injury, it is unlikely to cover employment disputes, contact disputes and importantly, investigation by the VAT and TAX man, these latter inquiries can be expensive, and even if you are successful then no costs can be recovered from Inland Revenue and Customs. For general business related disputes, access to a specialist lawyer is often needed to argue a case and your normal solicitor may not be able to offer this service. The cover provided by Commercial Legal Expenses Insurance can help with many of these costs and provide appropriate legal assistance in person and through help lines.

Some insurance policies now include Legal Expenses cover as standard or as an optional extra, and this cover is usually provided by the same insurer as the main cover. Whilst this may seem beneficial, if you have one of these policies and there is a dispute with your insurer for say, an aspect of a claim under your policy (i.e. dispute of the claim amount or voiding of a claim), then, as the legal expenses section is part of that policy, it won’t operate. A Legal Expenses policy taken out with a separate insurer will of course act for you against the other insurer in this case.

Beware The Small Print

‘Beware the small print’ is a common phrase used by people when talking generally about Insurance – but why then do we ignore this age-old adage when buying insurance online?

In this dot.com comparison site age, how many realise until it is too late that the policy they purchased, does not provide the cover expected. Unfortunately, when bought on-line, the full policy wording may only be available after purchase.

We are being conditioned by advertising to think that ‘cheaper is better’ these days – but to get a lower price, insurers make assumptions about you (one size fits all). A reduced number of questions are asked in an online quote form, because the Insurer wants to keep your attention, and many assume that because a certain question has not been asked, it does not matter – but this is not the case.

For example, when buying Home Insurance or Landlord Insurance it will state somewhere in the statement of fact that you accept the property is not near a river or watercourse, cliff or harbour. You may not realise the question has been answered NO, because it is one of many questions that default to NO and is automatically accepted when agreeing to the quote. If you don’t read the full ‘Statement of Facts’ before buying you won’t know – and what if this should be answered yes in your case? – you potentially have an invalid policy.

Alternatively get professional advice, as this is still the safest way to buy insurance. A Professional Insurance Broker will ascertain your demands and needs and ask the appropriate questions, avoiding the pitfalls of online question sets with defaults. I’ll finish with the other wise adage ‘you get what you pay for’.

Top 10 business insurance FAQs

Business Insurance has been developed to provide essential cover in the event of claims arising from loss or damage to property and injury to persons in the course of carrying out your business activities. For businesses with a professional service, protection from claims arising from professional errors and omissions is very important. If you value your business and livelihood then you should have effective insurance cover in place. Claims against your Business could potentially result in not just substantial cost to the company but to you personally - even Director's of Limited companies are at risk - which is why Directors and Officers liability cover is also becoming crucial.

Here are the 10 ten most Frequently Asked Questions about business insurance:

1. DO I NEED TO TELL THE INSURERS EVERTHING ABOUT MY BUSINESS?

Your Insurers need to be aware of all the facets of your business in order to asses the risk and meet the needs and demands of your insurance requirements to ensure you are fully protected. Failure to advise your insurers of a material fact could invalidate your cover!

2. WHY DO I HAVE TO REVEAL MY WAGE ROLE?

Your Insurers need this information assess the size of your company and the potential liability you may have to other parties.

3. DO I HAVE TO TAKE OUT LANDLORD INSURANCE TO INSURE MY LANDLORDS PROPERTY?

This depends on the terms of your lease. If the landlord assumes responsibility for the insurance of the buildings you occupy then you do not need to insure these yourself. However you should ascertain exactly what the lease specifies. If for example your lease makes you responsible for the insurance of existing fixtures and fittings, shop fronts, etc... then you must insure these. You will no doubt decorate and improve the risk with your own fittings. These must also be insured as the landlord will not insure them.

4. DO I REALLY NEED PUBLIC LIABILITY INSURANCE?

In this litigious age every business needs to protect itself from claims from third parties for damage to the their property or for injury. The cover will protect the business from claims dealing with the legal costs and if necessary paying the damages awarded. Even defending a no win - no fee attempted claim, costs can run into thousands of pounds, which this cover will provide for.

5. I PUT UP DISCLAIMER SIGNS AND HAVE PEOPLE SIGN DISCLAIMERS SO DO I NEED LIABILITY INSURANCE?

Unfortunately yes. Signs may dissuade some claims but in law they have very little sway. The person injured may be blind or illiterate and cannot read the signs. They may well still attempt a claim even if they have signed a waiver on the basis that they did not know what they were signing and this claim would need to be defended.

6. I ONLY EMPLOY MY FAMILY DO I HAVE TO HAVE EMPLOYERS LIABILITY INSURANCE?

The Employers Liability Act 1969 does exempt family members from cover but if you trade as a limited company then you are legally required to have cover as per the Act.

7. I DO NOT HAVE MUCH STOCK SO CAN I ONLY INSURE MY LIABILITES?

Yes of course, but in protecting your business and continuing to trade you must consider the other aspects of cover that most business insurances provide. Business interruption (loss of profits), money cover, damage to fixtures and fittings, leased equipment, etc... Under the terms of most leases you are liable for these.

8. I SELL PRODUCTS TO THE PUBLIC, IF THEY CAUSE INJURY DUE TO SOME DEFECT BEYOND MY CONTROL AM I INSURED?

Public Liability policies can include liability arising from products supplied.

9. WILL MY PUBLIC LIABILITY POLICY COVER CLAIMS AGAINST ME FOR ERRORS AND OMISSIONS OR DEFECTIVE WORKMANSHIP?

A public liability policy will only cover injury to the public or damage to their property caused by negligent acts. Errors or Omissions such as wrongful advice is protected by professional indemnity insurance. With regard to defective workmanship, a public liability policy is not a guarantee that you know how to carry out your trade so defective workmanship is excluded.

10. WHY DOES MY BUSINESS POLICY RESTRICT THEFT COVER TO THEFT BY FORCIBLE AND OR VIOLENT MEANS?

As you can imagine, if the public are allowed unlimited access to business premises such as shops, offices, hotels, etc. then theft is very easy for the opportunist thief. Some restrictions have to be imposed hence the requirement for forcible entry.