Legal Protection Insurance

Australian Legal Protection Insurance

LEGAL PROTECTION INSURANCE
PROVIDES ADVICE AND COVER

WHEN PURSUING OR DEFENDING

CERTAIN CLASSES OF LEGAL ACTION

What is Legal Protection Insurance?

Legal expenses insurance provides advice and cover for the legal costs of pursuing or defending certain classes of legal action. It is not a substitute for general liability, professional indemnity or directors and officer’s insurance, or management liability insurance, but it aims to cover legal expenses not covered by those insurances and not related back to professional services in the way that professional indemnity insurance does.

Legal expenses insurance complements other classes of insurance, as it removes the financial burden associated with legal disputes and also provides access to legal advice and assistance, which could curb the need for full-scale litigation.

What does it cover?

Each policy holder has access to a Free Legal Advice Service managed by a prominent Australian legal firm. It enables clients and the insured to receive targeted advice from a lawyer relating to any problem directly connected to the client’s core business activities. The legal advice is free, provides specialist advice, fast turn around and clients can obtain legal advice as many times as required throughout the policy period without limitations.

Legal Protection Insurance covers civil legal disputes or action in a court or tribunal, either commenced by the insured or commenced against the insured by a third party which relates to the insured’s core business activities and which falls within one of the policies Head of Cover below.

Legal expenses insurance complements other classes of insurance, as it removes the financial burden associated with legal disputes and also provides access to legal advice and assistance, which could curb the need for full-scale litigation.

Head of Cover 1: Contractual Disputes regarding Supply of Good and/or Services

Perhaps the most valuable head of cover for most SMEs, this section provides the Insured’s own legal costs and any legal costs awarded against them both when defending a claim against them by a customer or supplier; and when pursuing a customer or supplier over the breach of a term in a written commercial contract Examples include where a retailer Insured has had to pursue a supplier over sub-standard goods which they had bought to sell on; and where the Insured has a lawyer defend them when they have refused to pay a hire company for a faulty piece of plant equipment leased to them.

As this is the section of the policy that has most claims there is a 90 day waiting period from the inception of the policy.

Claims need to be greater than $5,000.

Head of Cover 2: Tax Audit

Tax Audit is now becoming a well-established standalone product in Australia and has been included with legal expenses policies for a number of years. This cover will, in certain circumstances, pay for an Insured’s accountant to respond to an audit by the Australian Taxation Office. If the audit escalates into a dispute, the policy can extend to also cover a specialist lawyer to represent the Insured in any proceedings which may arise.

The main features under this policy compared to other Tax Audit policies is that not only does it cover expenses associated with the Tax Audit, but it covers a claim from the
ATO where additional GST is due or where additional income tax or fringe benefits tax is due.

Head of Cover 3: Statutory License Protection

This section will indemnify the Insured for costs incurred in seeking to protect the Insured’s rights under a statutory licence which is under threat of suspension, revocation or amendment and could have a material impact to the client’s ability to conduct their business. The policy will provide expert legal assistance to challenge any attempt to suspend, revoke or alter the terms of the licence to the Insured’s detriment.

Head of Cover 4: Landlord Disputes

Whenever an SME rents its business premises from a commercial landlord, there is scope for dispute over the terms of the lease and alleged breaches arising from it. The policy will provide the Insured with a lawyer to pursue a claim against a landlord or defend themselves in the event that they are accused of a breach.

Head of Cover 5: Restrictive Covenant Pursuit (protecting a client’s intellectual property)

An SME’s customer base and sensitive commercial information is its lifeblood. When an employee leaves, it is imperative that they are not able to take this information to a new employer and use it to prejudice the SME’s interests. This cover ensures that where a restrictive covenant preventing them from doing so is written into their employment contract, legal assistance is on hand from a specialist in the field to enforce the relevant terms as far as the law will permit, in order to mitigate the damage caused. The Legal Assistance service is a great feature for this head of cover

Head of Cover 6: Third Party Damage to Goods or Premises

This section is triggered when a third party causes damage to an Insured’s premises or property and will also allow an Insured to pursue someone who has taken property without the consent of the Insured (including former employees/contractors).

Head of Cover 7: Debt Recovery

Cash flow is vital to all SME businesses. The debt recovery service provided under the policy will provide assistance for the Insured to exert pressure in recovering the sums due, and ultimately taking the matter to court if this fails to bring the desired outcome.

There is a two stage process to recover debt. Firstly, by completing a legal letter to the debtor and secondly, a debt recovery professional (appointed by Sparke Helmore) will communicate with the debtor and, if payment has not been made, legal proceedings will commence. The head of cover relates to debt over $2,500 for first stage and $5,000 for second stage court proceedings.

Legal Advice Service

Every one of our Legal Protection policies comes with a free legal advice service, which allows the Insured to receive targeted advice from a lawyer about their current legal matter.

Sparke Helmore provides a 48 hour service turnaround to policy holders. Whilst Sparke Helmore are a SME law firm, they have specialist lawyers for each legal discipline. For example, a Tax Audit query/claim will be dealt with by a specialist tax lawyer. Clients can contact the Legal Helpline as many times as required throughout the policy period, without limitations.

Premiums and Policy Limits

Premiums are based on turnover, and the policy limits are;

  • Limit of Liability

    $100,000 any one claim, $250,000 in the aggregate

  • Head of Cover 1: Contractual Disputes

    $100,000 any one claim

  • Head of Cover 2: Tax Audit

    $100,000 any one claim

  • Head of Cover 3: Statutory Licence Protection

    $100,000 any one claim

  • Head of Cover 4: Landlord Disputes

    $100,000 any one claim

  • Head of Cover 5: Restrictive Covenants

    $100,000 any one claim

  • Head of Cover 6: Third Party Damage to Goods and Premises

    $100,000 any one claim

  • Head of Cover 7: Debt Recovery

    $100,000 any one claim

*90 day wait period applies to new policies