Legal expenses insurance -
is it worth it?
Lawyers are expensive. For many, the most amazing fact arising from the recent London high court clash of two Russian oligarchs was not the issues or who won but the case's estimated £100 million costs.
Back on planet Earth, high street solicitors often charge £150 an hour – and cases often take many hours. Legal aid? It's generally only for the least well-off. Yet we are faced with a growing number of potential disputes – at work, with neighbours, in the street and on the road, with manufacturers, tradespeople, and professionals such as doctors and architects.
Despite a number of launches over the past 25 years, few have bought standalone legal cover
in the UK.
Insurance, where many expend relatively small sums to pay for the costs of a small number with big, unforeseeable costs could be an answer. Nearly half of German households have legal expenses policies – mostly around €100 to €150 a year. But the German legal system has costs generally fixed at the outset so insurers know where they stand.
There is no such cost certainty in the English legal system. The media often quote cases of neighbour disputes over trees, fences, or a few inches of boundary, which escalate into six figure bills. Families have lost everything – sometimes in fighting liabilities they never knew they had such as “chancel repairs” where those living in certain dwellings have been responsible for the upkeep of their local Anglican church, irrespective of any religious affinity.
The law on this changes in October 2013
Despite a number of launches over the past 25 years, few have bought standalone legal cover in the UK. Those policies that exist generally exclude divorce, wills, probate, property conveyancing – because you have choice in these matters - and criminal charges. But millions have legal expenses cover with household and/or motor insurance. Sometimes, this is included in the policy, often it's an optional add-on costing about £25 a year, irrespective of the premium for the other items. Most policies pay up to £50,000 or £100,000 in legal expenses. Almost all, however, start with a call centre staffed by legal experts. These will advise if you have a case – there's no point in banging your head against a legal brick wall, or if the cost of fighting an action is disproportionate to the claim. They may propose “non-legal” solutions such as an ombudsman or conciliation service, or suggest the “do-it-yourself” small claims court, useful, for instance, in chasing a garage for shoddy repairs.
Policies vary but home insurance add-ons generally help with cases around your home – garden, party wall, and damage disputes are among the most common. Many extend to certain employment disputes, personal injury, and some contracts for goods and services. The motor add-on usually concentrates on car-related issues. This may be a court case but the most usual is “uninsured loss recovery” where you seek to pursue the other side in an accident to prove you were without fault to retain your no-claims discount and excess. An increasing number of ULR cases involve foreign-registered vehicles. Without insurance to help, the legal expenses may be high. There is also specialist legal cover for landlords involved in tenant disputes.
There's no point in over-insuring. Professional associations, trade unions and similar bodies may offer legal expenses as part of the annual membership subscription. Sometimes these – and a number of paid-for policies – cover all the household. What can go wrong?
Common complaints include:
- Exclusions – there are always grey areas but in legal disputes, rarely black and white anyway, these might be even more opaque.
- Refusal to act – it's up to the insurers to decide if your complaint has legal merit so they won't pay for cases they consider unwinnable or with low chances of success, even if other lawyers rate the chances higher.
- Settlements – lawyers often prefer a compromise rather than a potentially long and costly action. This could mean lower damages
than you demanded.
- Choice of lawyer – policies should offer choice once a case is under way. But they may have cost limits – so forget that big city law firm or