The legal cover you might not know you have

If you’ve got insurance on your home or your car, then the chances are you’ve also paid around £20 extra for something called legal expenses insurance (LEI). But if you’re anything like the average person you probably forgot about it the minute you bought the policy.

Anybody who’s 'gone legal’ to settle a dispute will tell you how expensive the law is. And many who dig deep to pay legal costs to sue that uninsured driver, the council for that badly laid paving slab or their employer for unfairly dismissing them, often forget about the LEI policy that came with their car or home insurance, lying buried in the back of a drawer.

The popular add-on to car insurance will usually cover the cost of legal assistance and, where necessary, court costs following a road accident, and pay for a hire car while you’re off the road. The household version meanwhile (sometimes referred to as ‘personal’) usually covers consumer disputes, personal injury cases, or disputes with your employer - or even a neighbour whose new garden wall has stolen three feet of your garden.

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Unlike conventional insurance, LEI doesn’t make a direct payment for a claim like pranging your car or drilling through a water pipe when putting up shelves - these accidents are covered by your existing insurance. Instead, it covers the legal costs involved in pursuing or defending a claim against a third party for ‘uninsured losses’. Legal costs include the appointment of solicitors, barristers and expert witnesses.

Regardless of which broker you buy your car or household insurance from, the LEI policies themselves are issued by Allianz, Aviva, DAS, Capita and Legal Protection Group.

Technically, there’s no limit to the amount of claims you can make over the 12-month life of a policy, which can pay from £50,000 (Norwich Union) of legal expenses for each claim to £1 million (the AA). However, there are a number of factors the insurance company will consider before giving your grievance the green light.

"These policies pay the legal costs of pursuing a claim for uninsured losses against a third party," says Mike Timmons, head of underwriting at LEI specialist, DAS, which has two million motoring and eight million personal LEI policies currently in issue. "But there are caveats: policies have various excesses limits, and we have to believe you have a greater than 50% chance of success. Insurance companies aren’t charities."

A little misunderstanding

This partly answers the accusation that the issuers of LEI policies are only too keen to collect the premiums but less than enthusiastic about dealing with claims. "It’s often the case of the customer misunderstanding the nature of LEI - their problem is often covered by their original insurance policy," says the AA’s spokesperson, Ian Crowder, who says claimants on the AA’s LEI need a 51% chance of winning.

But even if you’re not sure whether you’re eligible to claim, Crowder says you can still benefit by calling the insurer’s free 24-hour helpline. "If you think an hour of a solicitor’s time could cost you £150, simply calling your LEI’s legal helpline for 10 minutes easily saves you the cost of the policy."

Another accusation levelled at LEIs is that, when they do process a claim on your behalf, they may refuse you the right to legal representation of your own and insist you use solicitors from their panel. But Timmons says using a legal panel not only helps keeps premiums down, it also ensures the legal representative is "fit for purpose".

However, DAS only insists you use its legal panel up to the proceedings stage (before it goes to court), after which you’re free to use your own solicitor and DAS will pay the fees. But there is a catch. "We have to be satisfied with your appointed solicitor’s expertise, so we have a right of veto if we feel he or she is not up to the job," explains Timmons.

Crowder also adds that it makes sense to use a panel of solicitors who are chosen because of their expertise in a particular area covered by the policy. "If you were about to enter litigation with an employer for unfair dismissal, would you rather be represented by a solicitor specialising in employment law or your own solicitor who perhaps handled your divorce or house conveyancing?" he adds.

Trips and slips

Personal injury cases are a big source of LEI claims - what the insurance industry calls ‘trips and slips’. However, Crowder says these claims are not as successful as they once were because councils have "wised up" and are defending claims more robustly than in the past, and also taking greater care in filling in potholes and levelling paving slabs. Trips and slips aside, this bit of LEI also covers consumer problems and disputes with your employer, which is a massive growth area.

The number of employment tribunals has skyrocketed in recent years as workers across the board become more aware of their rights. In 1985, there were 38,000 industrial tribunal applications; but in 2007, that figure had risen to over 100,000, according to the Employment Tribunal Services.

"Employment disputes are one of the biggest sources of LEI claims," says Timmons. "By constrast, with consumer disputes, retailers almost always fold and settle when they know the consumer has the ability to mount a legal case against them."

However, suing someone whom you feel has besmirched your good name and reputation is not an option. Although you can call the legal helpline to discuss such a case, one of the two big exclusions on LEI policies is mounting a libel case. The other is what’s loosely termed ‘matrimonial disputes’, so you can’t rely on this policy to cover the cost of a divorce.

As people have grown more affluent and property values have appreciated over recent years, the likelihood of a person of average means qualifying for legal aid has greatly diminished. So these policies represent one of the few ways you can access the judicial procedure without the threat of running up massive legal bills.

And, because of the low cost, the nature of your claim will always be greater than the premium you pay, even over a 20-year period at £20 a year.

"In the UK, we sell LEI on the back of other policies, so this keeps the premiums down to reasonable levels," says Timmons. "In Europe, however, LEI is sold as a standalone policy, and the premiums are in the region of £250 - over 10 times what it costs in the UK."

So, if you do have a legal concern, it may well be worth your while scouring the back of your drawers to see if you already have insurance for legal expenses.

Who can claim?

These are genuine cases of claims - some approved, some rejected - made to the insurers mentioned in this article.

  • A man goes camping for the first time and pitches his tent on a slope. It rains overnight, and when he emerges the next morning, he slides down the slope and crashes into a fence. He sues the campsite for not having put a sign up that said the grass, when wet, could be slippery. The claim was approved and £70,000 in damages awarded.
  • A woman’s cat gets stuck up a tree. She calls the fire brigade who, in the course of rescuing the cat, drop it and kill it. She tries to sue the fire brigade to recover the cost of the cat.

This claim was rejected because the replacement cost of the moggy was deemed to be only a fiver and the policy didn't pay out on claims under £250.

  • A man hears a story that urine kills leylandii trees, so he starts relieving himself on his neighbour’s towering trees. However, the urine corrodes an electrical conduit linking his neighbour’s house and garage and one day, while taking his leak against the trees, the pee hits the mains electricity supply, creates a circuit and he gets a nasty electric shock.

He then tries to sue the neighbour for damages. The claim was rejected and his neighbour pressed charges of vandalism against him.

  • A mattress ordered over the internet was deemed, when delivered, not to match the carpet and curtains of the customer’s bedroom. They sue the company for putting misleading information on its website.

The claim was rejected, on the grounds that the mattress would be covered by several layers of bedding, so its pattern was immaterial.