Commercial disputes are common and can arise from a wide range of issues. In today’s economic climate, the financial burden of resolving such disputes through legal means is a significant factor to consider. A potential litigant must not only account for their own legal fees but also the potential obligation to cover the opposing party’s costs.

It is, therefore, extremely beneficial for individuals to have a form of legal protection cover in place, as legal costs can soon become overwhelming. Legal Expenses Insurance (LEI) offers individuals the opportunity to pursue legal action without worrying about legal fees. This type of insurance provides access to expert legal advice and protects the individual or business.

Choosing the right type of legal cover – whether commercial LEI or another insurance product – can make a significant difference. Seeking professional advice is key to understanding your options and securing the most suitable coverage. Annecto Legal can support you through this process, helping you find the right solution for your circumstances. 

What is legal expenses insurance?

Legal expenses insurance is designed to protect individuals and businesses from the financial consequences associated with pursuing or defending legal claims. Policies typically cover solicitor fees, barrister fees, court fees, expert witness costs, disbursements, and various other legal costs that arise throughout a dispute. Importantly, LEI does more than provide financial – it also helps ensure access to specialist legal representation, which is essential for achieving a favourable outcome.

Legal expenses insurance usually falls into one of two categories:

After-the-Event insurance (ATE) – ATE insurance is purchased after a legal dispute has already arisen. This is the most common form of LEI for individuals, particularly in cases involving contract disputes, contract disagreements, intellectual property matters, employment claims, professional negligence, unfair dismissal, and more.

Key features include:

• Protection from paying the opponent’s costs if the case is unsuccessful
• Coverage for disbursements such as expert reports
• The option, in many cases, is to defer the premium until the conclusion of the case, paying from any damages recovered

Before-the-event insurance (BTE) – BTE insurance is purchased in advance, typically as add-on to broader insurance policies (like motor legal insurance, business insurance, or home insurance). It provides coverage for legal issues that may arise in the future.

BTE policies often include access to early legal advice, which can assist in resolving issues quickly and avoiding escalation.

The requirement for prospects of success 

Most legal expenses insurance policies, whether ATE or BTE. Require that a claim has “reasonable prospects of success”. This usually means:

• The case must have at least a 51% chance of success
• The potential compensation must be proportionate to the expected legal costs

If the prospects fall below this threshold at any stage, insurers may reconsider or withdraw cover. This ensures that only cases with strong legal merit proceed under insurance backing.

What are the benefits of using legal expenses insurance for individuals?

Legal expenses insurance offers a wide range of advantages for individuals who may face unexpected legal challenges. Key benefits include:

• Financial protection – LEI covers essential legal costs, including solicitor fees, court fees, and expert reports. Without this support, individuals may struggle to fund even straightforward legal action.
• Access to expert legal advice – Policies usually include access to dedicated helplines where individuals can seek early legal advice on emerging issues. This helps them make informed decisions and may prevent a dispute from escalating unnecessarily.
• Reduced risk of financial loss – In many cases, LEI also covers the risk of having to pay the other side’s legal costs if you lose the case. This helps to offer peace of mind when deciding whether to take legal action.
• Interim costs orders – Throughout legal proceedings, interim application can carry significant cost exposure. Legal expenses cover helps shield individuals from these financial threats.
• Better positioning – Opponents are often more willing to settle once they know that a reputable insurer has assessed the case, believes in the prospects of success, and is prepared to fund the claim. This can influence the opponent’s behaviour and create more favourable negotiation dynamics. 

How do insurers assess the case?

Legal expenses insurance policies typically include a clause that allows insurers to reject or discontinue a claim if it does not meet the threshold of having “reasonable prospects of success”.

Another important factor is proportionality. Insurers consider whether the potential benefit of the case justifies the legal costs involved. If the costs are likely to exceed any possible compensation or resolution, they may decline to fund the claim.

In summary, insurers carefully evaluate both the policyholder’s risk and the strength of each individual claim, focusing on whether the case is covered, viable, and cost-effective to pursue. 

How can Annecto Legal assist with legal expenses insurance for individuals?

Annecto Legal can assist individuals with LEI by offering expert guidance and practical support throughout the entire process – from understanding your options to securing appropriate cover and making effective use of it when needed.

Annecto Legal helps individuals assess whether legal expenses insurance is suitable for their particular circumstances. Our team can assist you in understanding the risks involved and whether insurance would provide the financial protection you require.

With comprehensive legal expenses cover, you can move forward with confidence, knowing your financial exposure is minimised and your ability to secure strong legal representation is enhanced.

Contact an expert member of our team today to find out more about buying legal expenses insurance and which cover is the correct litigation funding choice for you.