The Bionic guide to legal expenses insurance

All businesses need insurance. Without the right kind of cover, unexpected costs can be financially disastrous for any small business. But when there are so many kinds of insurance out there in the marketplace, it can be hard to know where to start looking.

Legal expenses insurance is a type of insurance that lots of small businesses should consider, as it covers you for costs incurred as a result of legal proceedings. If your business is one that is prone to legal claims, either brought by or against you, it could be a worthwhile investment.

What is legal expenses insurance?

Legal expenses insurance - sometimes known as legal protection insurance - will protect businesses against the cost of almost all legal action in the UK, whether the case is brought by you or against you.

For many businesses, legal action is an occupational hazard. You don’t necessarily need to run a business badly to face compensation claims or be forced to go to court yourself to chase non-paying clients.

Taking out legal expenses insurance for your small business will cover the cost of any legal fees associated with cases in which you are involved. It also could compensate you for the cost of damages awarded against you, if you happen to lose a case.

What is covered by business legal expenses insurance?

Legal expenses insurance in the UK can cover the costs incurred by a wide range of events. In general, it is the insurance policy your business needs to ensure protection against legal costs while a claim or dispute is being pursued.

Expenses covered will include the appointment of solicitors and barristers, the recruitment of expert witnesses and, in some cases, the cost of compensation awards made against you.

Depending on your policy, commercial legal expenses cover could offer protection in the following instances:

• Contract disputes - this covers costs associated with either defending or pursuing legal action related to a contract for purchasing, leasing, hiring, servicing, testing, maintaining or selling any goods or services.
• Personal injury - this protects you against the costs associated with legal action relating to an injury or death attributed to your business.
• Compensation awards - money paid out in compensation will be considered a legal cost in certain circumstances by some insurers. Check the specifics of your policy if you think that your business may be liable to compensation awards from time to time.
• Employment disputes - these are quite common for many businesses, large and small. Employment disputes can be in the form of claims for wrongful dismissal, discrimination or harassment, among other things.
• Property protection - this includes disputes relating to the possession of property, tenancy agreements or damage to your business’ property or its contents. However, if you are a commercial landlord, you may also want to consider taking out rent guarantee insurance as well as legal expenses cover.
• Compliance and regulation costs - this could include the cost of appeals against enforcement notices related to health and safety. 

Are there any exclusions on business legal expenses insurance?

What is and isn’t included in your legal expenses insurance will vary from insurer to insurer, and depend on what policy you decide to take out. However, there are certain things which tend not to be covered.

For example, any legal expense not agreed beforehand in writing by your insurer, or any expense relating to something that occurred before the start of your policy, will not be covered.

Disputes over patents, copyright, trademarks and passing off are also often covered by a different type of legal insurance. This is the case for disputes over franchise or agency rights as well.

Costs that relate to allegations of a serious or criminal nature may not be included in your business legal expenses insurance either. For example, if someone makes allegations of violence, dishonesty or money laundering against your business, or if you are accused of an offence related to pollution or contamination.

When might your business need commercial legal expenses cover?

A small business will need commercial legal expenses insurance or cover whenever it is faced with a claim against it that could incur legal fees, or when it brings such a claim itself. 

Most businesses will eventually deal with some sort of legal issue at some point. Whether it is an employment tribunal claim brought by an employee, a contract dispute between yourself and another business, or a regulatory issue, litigation always costs money. And sometimes it can cost a lot of money.

That’s why most businesses should consider taking out commercial legal expenses cover, and any business that operates in a sector where the risk of legal action is high would be well advised to seek out an appropriate policy.

What level of legal expenses cover does your business need?

The level of legal expenses cover that your small business needs will depend entirely on how many legal issues you expect to face, and how expensive they might be.

Normally, you will be offered a choice in terms of how much you want your maximum legal cover or insurance amount to be, and this would be for the full period of the insurance policy. A higher limit will typically cost more. 

How high your cover limit is and how much it costs will also depend on whether the products or services your business supplies are considered to be high or low risk.

Can you buy legal expense insurance?

Yes, you can. Business owners can buy legal expenses insurance as a separate policy or add it on to most current insurance policies. Have a chat with Bionic to see what package might be best for your business and if there are any other providers that could offer you a better deal.

How can Bionic help you find the right business insurance?

Whether or not you need legal expenses insurance or a different type of cover entirely, Bionic can help you to find the right type of business insurance for you.

And if legal expenses cover is what you’re after, we can help you decide how much you require and get you a great deal from an insurer.

Leveraging our team of insurance industry experts and state-of-the-art technology, we will scour thousands of deals from dozens of insurers and make sure the insurance you go for matches the unique needs of your business.