What is Legal Expenses Insurance?
The purpose of this insurance is to provide protection to the insured against the costs of bringing or defending legal action to resolve a dispute.
In England and Wales, if you win your case, you can usually recover your solicitor’s fees from your opponent. If you lose however, you may have to pay your opponent’s legal fees.
As well as the fees of solicitors, other expenses are often incurred when bringing or defending legal action. These could include the costs of “expert reports”, which are usually statements given by independent experts which are then used as evidence in support of the case. Your opponent may also use experts to support their case. In addition to solicitor’s and expert’s fees, there can also be fees incurred for the use of barristers. These additional fees are called “disbursements”.
Legal expenses insurance can, subject to the level of cover, pay both your own and your opponent’s solicitor’s fees and disbursements if you lose a case and are ordered by the court to pay them, or you do not recover them from your opponent.
Your Options
Over the last 50 years or so different forms of legal expenses insurance have developed. It is usually quite easy to tell them apart as the way they work is dependent upon when you purchase them.
Before The Event (BTE) Legal Expenses Insurance
This is the most traditional form of legal expenses insurance. It is usually sold as an “add on” to a household or motor insurance policy although it is also available through other financial institutions as well as associations or unions.
The insurance is provided over a period of 12 months and covers you for legal disputes you become involved in during this time. Where this cover is not included as part of a premium or subscription it might cost £30.00-£75.00.
After The Event (ATE) Legal Expenses Insurance
ATE insurance has been available since 1999 and is usually offered through solicitors. It is purchased after a dispute has occurred and usually at the point where a claim is started which may lead to legal action.
There are two types of after-the-event insurance.
1. With a Conditional Fee “no-win-no-fee” Agreement
A solicitor may agree to act for you under a conditional fee agreement, more commonly known as “no win-no fee”.
Under this type of arrangement your solicitor agrees not to charge you a fee if you lose your case (subject to some conditions). Because of this, if you win the case, your solicitor is entitled to charge an extra fee to you called a “success fee. This success fee cannot be recovered from your opponent if you win the case.
Under a “no win-no fee” arrangement however you may still have to pay your opponent’s legal fees together with both your own and your opponent’s disbursements if you lose the legal action. To protect you against this, your solicitor can arrange “Conditional Fee Insurance” which will, subject to certain conditions, pay these costs on your behalf.
2. On a “Private Client” Basis
As an alternative to a “no win-no fee” arrangement, your solicitor may in certain circumstances, work for you on a “private client” basis, although this rarely happens in personal injury cases. This basically means that you will have to pay the solicitor whether you win or lose.
To protect you from these costs however, the solicitor may offer you “Both Sides Costs Insurance”. This form of legal expenses insurance will pay both your own and your opponent’s solicitor’s fees and disbursements whether you win or lose, subject to conditions.
As you should recover your own solicitor’s fees and your disbursements from your opponent when you win, you would not need to claim under the insurance. Like Conditional Fee Insurance, it is really there to protect you if you lose.
The cost of ATE insurance can range from £75.00 to £5000.00, depending upon whether you choose a conditional fee or both sides costs policy; the type of dispute you are involved in; and the stage at which you buy the insurance.
You cannot generally recover the cost of an ATE insurance premium from your opponent, even in successful cases.
Generally, Conditional Fee Insurance in claims for personal injury is taken out at a very early stage as this attracts the lowest premiums.
What's Best For You?
If you are involved in a dispute which may require legal action, you should check your existing insurance policies or contact your insurance adviser to see whether you have BTE legal expenses insurance. If you do not have this cover, you should contact a solicitor. They will discuss ways in which they are prepared to finance your case and the insurance options available.
Your Solicitor's Responsibilities
Your solicitor is under a duty to provide the best advice they can as to how you should finance your legal action. They will advise you which of the insurance options available and which option they feel is best suited to your circumstances.
The Motor Accident Solicitors Society
It is essential that you use a good, experienced solicitor. The Motor Accident Solicitor’s Society is a national Society of solicitors who specialise in road traffic accident claims. Its Members are required to adhere to a strict service charter providing you with the peace of mind that your claim is being handled by experts. Whilst specialising in road traffic accident claims, Members can also advise on a wide range of legal disputes encountered on a daily basis.
To contact the society, visit our Contact Us Page and fill out an enquiry form. Alternatively, you can also reach us by email on enquiries@mass.org.uk or by telephone on 0117 925 9604.
“Legal Expenses Insurance Explained” was written by Paul Lewis, Partner at George Ide Solicitors LLP.