Legal Expenses Insurance
Encyclopedia
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.
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.
s, barrister
s and expert witness
es, 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. ATE insurance costs are often, unlike BTE costs, recoverable by the successful party from the losing side as part of a monetary damages award or settlement.
, 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.
Insurance
In law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the...
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
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
. In the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, 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
Professional liability insurance
Professional liability insurance , also called professional indemnity insurance but more commonly known as errors & omissions in the US, is a form of liability insurance that helps protect professional advice- and service-providing individuals and companies from bearing the full cost of defending...
, 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
Directors and officers liability insurance
Directors and Officers Liability Insurance is liability insurance payable to the directors and officers of a company, or to the organization itself, to cover damages or defense costs in the event they suffer such losses as a result of a lawsuit for alleged wrongful acts while acting in their...
for principals and supervisory officers of corporations and other organisations.
Purpose
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 insuranceLiability insurance
Liability insurance is a part of the general insurance system of risk financing to protect the purchaser from the risks of liabilities imposed by lawsuits and similar claims. It protects the insured in the event he or she is sued for claims that come within the coverage of the insurance policy...
against certain kinds of legal liability
Legal liability
Legal liability is the legal bound obligation to pay debts.* In law a person is said to be legally liable when they are financially and legally responsible for something. Legal liability concerns both civil law and criminal law. See Strict liability. Under English law, with the passing of the Theft...
, 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.
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 solicitorSolicitor
Solicitors are lawyers who traditionally deal with any legal matter including conducting proceedings in courts. In the United Kingdom, a few Australian states and the Republic of Ireland, the legal profession is split between solicitors and barristers , and a lawyer will usually only hold one title...
s, barrister
Barrister
A barrister is a member of one of the two classes of lawyer found in many common law jurisdictions with split legal professions. Barristers specialise in courtroom advocacy, drafting legal pleadings and giving expert legal opinions...
s and expert witness
Expert witness
An expert witness, professional witness or judicial expert is a witness, who by virtue of education, training, skill, or experience, is believed to have expertise and specialised knowledge in a particular subject beyond that of the average person, sufficient that others may officially and legally...
es, 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. ATE insurance costs are often, unlike BTE costs, recoverable by the successful party from the losing side as part of a monetary damages award or settlement.
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), less 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 Canada
In QuébecQuebec
Quebec or is a province in east-central Canada. It is the only Canadian province with a predominantly French-speaking population and the only one whose sole official language is French at the provincial level....
, a program has been successful because it was both endorsed and promoted by Québec's law society
Law society
A Law Society in current and former Commonwealth jurisdictions was historically an association of solicitors with a regulatory role that included the right to supervise the training, qualifications and conduct of lawyers/solicitors...
(bar association
Bar association
A bar association is a professional body of lawyers. Some bar associations are responsible for the regulation of the legal profession in their jurisdiction; others are professional organizations dedicated to serving their members; in many cases, they are both...
), 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.