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What is commercial legal expenses insurance?

Commercial Legal Expenses Insurance, otherwise known as Commercial Legal Protection cover, is an insurance policy designed for SME businesses to assist them in the event of unexpected legal issues. It generally provides both legal advice and legal cover to the policy holder and is designed to complement, rather than replace, other insurance policies that also include aspects of legal assistance.

Why have both Commercial Legal Expenses Insurance and Liability Insurance?

Business insurance policies such as Professional Indemnity, Public Liability, Directors and Officers or Management Liability, generally include coverage for some legal costs, eg. negligence costs against the business.

However, Commercial Legal Expenses insurance is designed to cover legal expenses not covered by other policies. These are often unrelated to negligence and may arise in disputes over contracts, payments, employment and taxation law and other legal matters such as those described below.

How can Commercial Legal Expenses reduce my Legal Costs?

Commercial Legal Expenses insurance may also include access to preventative support services to reduce the need for litigation. This may include accessible legal advice and services such as accounting and debt recovery as part of the policy.

What does Commercial Legal Expenses Insurance cover?

Commercial Legal Expenses Insurance covers legal expenses related to core business activities. Different policies offer different coverage, however coverage may be relevant to situations such as:

  • Commercial Contracts: Legal costs to pursue or defend against a disputed breach of a commercial contract
  • ATO Investigation or Dispute: Legal representation required in the case of tax disputes and investigations. Accounting costs in the case of a Tax Audit may also be covered.
  • Statutory Licence: Legal costs to challenge a threat to a business-critical Statutory Licence, eg. liquor, water, game, import/export, taxi, fishing or broadcasting licences. This includes suspension, revocation, alteration or refusal to renew.
  • Landlord Disputes: Legal costs related to disputes when renting commercial property
  • Restrictive Covenant Breaches: Legal costs to pursue proceedings against employees or ex employees breaching a restrictive covenant in their employment contract. eg. sharing sensitive commercial information or intellectual property or soliciting your employees or customers.
  • Debt recovery: Legal pursuit in the case of money owed. Debt recovery services costs may also be covered as a precursor to legal action.

Other possible scenarios include legal expenses incurred in disputes about data protection, property, employment law, criminal prosecution or the Workplace Health and Safety Act.
Other possible scenarios include legal expenses incurred in disputes about data protection, property, employment law, criminal prosecution or the Workplace Health and Safety Act.

Does Commercial Legal Expenses Insurance include Legal Advice?

Commercial Legal Expenses insurance may include a legal advice service as part of the policy via an agreement between the insurer and a dedicated legal services provider.

Legal advice may be accessed in this way in advance of any problem. This allows the business to make informed decisions that may prevent legal issues arising in future eg. understanding whether to agree to a contractual clause or rather seek an amendment prior to signing a contract.

Legal advice may also be accessed at the time of an insured event occurring, allowing a professional perspective and guidance to the business in the pursuit of a swift resolution outside of the legal system.

One benefit of including accessible legal advice as part of the policy is to potentially avoid litigation and the substantial time, energy and financial costs involved in pursuing or defending against legal action in court.

How do I know which Commercial Legal Expenses policy is right for my business?

Legal expenses can quickly become unaffordable in the case of unexpected legal action against a business. Each business has its own risk profile and ways in which it is more or less exposed to risk, including risk of legal expenses.

With complex and costly matters such as legal risk it is important to seek the guidance of an experienced and professional insurance broker in determining the type and level of coverage your business needs. At Grace Insurance we have experience in determining the best Commercial Legal Expenses Insurance cover for you.

General Advice Warning: This advice is general and does not take into account your objectives, financial situation or needs. You should consider whether the advice is appropriate for you and your personal circumstances. Before you make any decision about whether to acquire a certain product, you should obtain and read the relevant product disclosure statement.

All information above has been provided by the author.

Aimee Henderson, Grace Insurance, ABN 63 133 156 742, AFSL 233750

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