There are always risks involved when running a business. No matter how careful you are, there’s a huge chance that another party will get dissatisfied with your product or service and threaten to sue. You will surely require legal assistance to help you understand your situation and figure out the best approach in dealing with the matter.
Legal assistance, though, is not cheap. It can be incredibly costly, even if the claim against you or your business is found to be invalid. This is where you will benefit from legal cover for your business in the form of commercial legal expense insurance.
What is Commercial Legal Expense Insurance?
Also known as business legal protection insurance, commercial legal expense insurance, or simply legal insurance will help you in many ways. Simply put, legal expense insurance for businesses provides coverage for different types of legal expenses that you may have incurred as a policyholder.
This insurance is necessary to ensure you get access to advise and guidance connected to the legal claims against you or your business. It also covers the costs associated with pursuing legal action, which happens when the claim has been accepted. The insurance covers cases, whether they are brought against or by you.
Commercial legal expense insurance can be added to your existing business insurance. You can tailor the policy according to the requirements of your business. You can do this by adding business legal protection insurance to core insurance covers, such as public liability insurance and professional indemnity. With this insurance, you can cover different legal expenses, including:
Disputes with all employees from past to present and even prospective ones
Legal claims due to property damage or nuisance
Trespass-related claims
Disbursements
Witness fees
Court costs
Adverse costs, which may be a result of a judge order where you have to pay for the other party’s legal fees
As the policyholder, you’re entitled to receive tax advice through an easy to reach helpline. This confidential legal helpline can typically be accessed 24/7, although this service will still depend on your insurance broker. It may also include crisis support, which is crucial in dealing with the negative public response. This works to avoid or at least minimise the damage to the reputation of your brand.
Why Do You Need This Type of Business Insurance?
The Australian legal system is complex, not to mention extremely costly. That’s why many business owners, particularly small and medium enterprises, avoid dealing with legal issues. They don’t want to defend or pursue their rights, so they simply settle with the claimant. But that’s not the proper way. Also, it is possible that the entity charged is not at fault, which cancels the need to pay the settlement.
Management Liability insurance is designed to provide protection to both the business and its directors or officers for claims of wrongful acts in the management of the business.
Public Liability insurance is there to provide protection if someone makes a claim against the insured, the business or its employees.
The Australian legal system is complex, not to mention extremely costly. That’s why many business owners, particularly small and medium enterprises, avoid dealing with legal issues. They don’t want to defend or pursue their rights, so they simply settle with the claimant. But that’s not the proper way. Also, it is possible that the entity charged is not at fault, which cancels the need to pay the settlement.
Commercial legal expense insurance offers financial protection and legal assistance if you’re facing a legal dispute. Here’s why you should consider purchasing it for your business:
The hourly rate for lawyers in Australia can range from $350 to $650. It may be even more for you, depending on how complicated your case is.
About 45,000 Australians choose to face courts without a lawyer present because of the legal crisis, which mainly pertains to the attorney fees.
Some business owners ended up losing their business because of a legal dispute. While there are debt recovery programs for Australian businesses, it would have been easier if the legal issues had been addressed beforehand. That’s why legal expense insurance for businesses is crucial.
How Does Commercial Legal Expense Insurance Work?
To understand better, here’s a quick claim example.
Let’s say that one of your employees got into an accident whilst performing his job duties onsite. The employee reports the incident and makes a claim. You’re then charged with breaching health and safety regulations set by WorkSafe Australia. You have to answer the charge, so you contact your insurance broker, Grace Insurance.
Once notified about the situation, we talk to a specialist solicitor who then defends your charge successfully. It is later discovered that the injury of the employee was his fault.
Based on the example above, the insurance covers the solicitor’s fees, which initially cost you more than $2,500. You are covered for this legal expense since the insurance is automatically activated from the start of the policy inception date.
But it is important to understand that there are limitations to what the insurance covers. Your commercial legal expense insurance only applies to anyone claiming up to $100,000. Similarly, if the total claim exceeds $250,000, you will only be covered for that full amount.
Commercial Legal Expense Insurance Essentials
As you can see, it is highly beneficial to be covered for your business’ legal fees and other costs. However, you need to understand that the insurance policy is a product, which can differ from one broker to the next. That’s why it is essential to know exactly what you need from your commercial legal expense insurance.
Here are some points to consider:
Business legal protection cover does not provide a comprehensive cover. It is designed to work alongside other policies you already have in place.
If you employ people, you need to have workers compensation. This legal obligation applies to every business, even when you run your business in your home. Not getting a workers compensation policy can lead to heavy fines.
Before signing your insurance policy, ensure that you have read all the terms and conditions. You should have a complete grasp of the inclusions and exclusions.
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.
Frans du Plessis, Grace Insurance, ABN 63 133 156 742, AFSL 233750
This article originally appeared on
Grace Insurance Blog
and has been published here with permission.
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