What is commercial legal expenses insurance?
It is commercial legal protection insurance for businesses and the self-employed that can be used in various situations concerning your business activities.
Also known as business legal expenses Insurance, this cover pays for the cost of legal defence (or offence if you're bringing a claim against a third party) as long as you have over a 50% chance of winning.
What does commercial legal expenses insurance cover?
The core element is to provide legal assistance and defence at no cost when you're facing a claim against you or wish to bring a claim against a third party.
Each insurance provider offers a slightly different cover. Some covers are very focused on one issue, e.g. IR35 legislation. Others respond to a broader variety of business legal and tax issues:
- Commercial disputes
- Legal claims against your business
- IR35 and other HMRC investigations
- Criminal prosecutions
- Negative PR
- Compliance & regulation issues
- Unpaid invoices
Do I need commercial legal protection insurance?
Business legal expenses insurance is not considered an essential cover and is never contractually required.
Therefore, consider your industry, customer type, business partners, and industry regulations when deciding whether to use it.
Take estate agents as an example. Facing an unpaid invoice following a sale below the asking price or a threat of a fine from the regulator is very common. Professional indemnity or public liability insurance will not cover these types of legal threats.
Contract disputes are common across all industries, and even though you have a strong position, you may not be able to pursue a claim against your client or business partner due to the high legal costs.
Conversely, with business legal expenses insurance, you can access legal advice and defence if your case is strong.
How much is business legal expenses insurance?
The costs usually start at £25 per year, but depending on the provider, they can be as high as a couple of hundred.
At Suited, we include commercial legal expenses with every subscription because we consider it essential cover for small businesses and self-employed professionals.
They are the customer types who would need more time to meet the cost of a solicitor or have the time and resources to chase bad debt.
How do commercial legal expenses cover work?
At Suited, our commercial legal expenses insurance will provide you with qualified legal advice and assistance.
The legal team will consider your situation and recommend the best steps. If your claim is accepted, the legal team will guide you through every step from the outset, and when they consider it prudent, they'll take over to represent your best interest.
However, with commercial legal expenses insurance, you can also initiate a claim against a third party.
If you are facing a claim against you or want to pursue a claim against a third party, your chances of success must be greater than 50%. This is often expressed as a reasonable prospect of success.
The key phrase point is "a reasonable prospect of success".
The chances are determined by the insurance provider's legal team. Once you've submitted all the details, they'll consider the claim and let you know whether they agree to represent you.
How can Suited commercial legal expenses insurance help during an IR35 investigation?
A qualified accountant and legal representative will be appointed to your case to deal with the investigation on your behalf. Suited Business Legal Protect also covers the cost of appeals. Remember, your chances of success must be over 50%.
How much commercial legal expenses insurance do I need?
Based on the fact that most disputes can be ironed out through mediation, £100,000 should be plenty.
In the rare event of having to defend your business in a court of law, the amount should cover a substantial part of your legal costs, and, of course, how much you'll need to spend will probably depend a lot on how far you're prepared to go.
Remember that compensation or additional tax if you are found liable is not covered by commercial legal expenses insurance.
Suited commercial legal expenses insurance does cover the fees associated with mediation and will help you find the right professionals who'll guide and represent you throughout the whole process provided your case meets the 50% rule.
