Legal Expenses Insurance for Individuals – Buyer Beware!
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Such policies have helped bring greater equality to the bargaining power between employees and employers.
Provided a claim has a better than 51 percent chance of success and the costs are proportionate to the likely damages, then the legal expenses insurance company (the “LEI”) will back the claim and pay the legal expenses. Policies will often have an allowance of between £50,000 and £100,000 for legal fees. |
Many people buy the policy or find it’s included as part of their main household contents insurance. Often they don’t even realise they have the benefit of the policy until we ask them to look.
So far so good. However, nothing is ever simple and, unfortunately, there are some issues which frequently arise and cause considerable concern to our clients.
Most people buying the policy (separately or bundled up as part of their household contents insurance policy) don’t realise that it is not actually provided by their insurers (usually well know household names). In fact, the policy is sold by a specialist third party LEI company.
As a result, when you seek to rely on the policy, you are in the hands of the third party LEI provider, whom you don’t know and you have not actually contracted.
This is where the difficulties can start. Often the LEI company will try to insist that you appoint a solicitor from their panel. They can insist on this if it is in the policy, and for employment tribunal claims rather than those going though the courts.
Unfortunately, the panel firms always take on this type of work on bulk contracts. The net result is that the service provided to the client is inevitably mechanical in nature and highly impersonal. The panel firms know you are a “captive” client and you cannot go elsewhere: in our view, it is an unhealthy relationship to have with any professional advisor.
Worse still, the panel firms inevitably want to look after the best interests of their insurer clients, and, therefore, minimising the legal costs becomes of paramount importance.
We frequently find ourselves instructed to provide a second opinion on claims where cover has been refused or clients are being advised to settle at levels which they do not consider acceptable.
We recommend the following:
- Always buy legal expenses insurance – if you are unfairly dismissed, the legal costs of bringing a claim are significant and a LEI policy will help you sue your employer
- If, as most people do, you buy your LEI through your household contents insurers, ask them who the third party LEI insurer is and what reputation they have for backing claims
- Most importantly, ask your insurer whether the policy allows you to choose your own solicitor rather than using a panel solicitor. If the LEI does not offer this, ask them if they have an alternative LEI provider who does.
If not, think carefully about paying your premium. In our view, the only right choice is to purchase LEI insurance that allows you the freedom to instruct your preferred solicitor.
If you have questions on this or any related matter, please contact any member of our employment team:
Nicholas C J Lakeland: ncjl@silvermansherliker.co.uk
Martin D Donoghue: mdd@silvermansherliker.co.uk
Victoria J Russell: vjr@silvermansherliker.co.uk
Michael S Olley: mso@silvermansherliker.co.uk. |
