Legal Protection Insurance Q&A

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  • What is legal protection insurance?

    Legal protection insurers actively support their policyholders by providing legal advice and covering litigation costs, regardless of whether the insured is the claimant or the defendant. The policies cover the policyholder and often the members of his household. Legal protection insurance is usually available both for individuals and for undertakings.

    The policies normally cover most civil disputes (e.g. disputes concerning personal injury, consumer rights, property and labour law) and sometimes also criminal proceedings that have started as a consequence of an unintentional crime. When appropriate, and depending on the relevant national rules, the experts employed by the insurer might manage the claim for the insured from start to finish.

    Besides the provision of legal advice and coverage for the legal expenses that the policyholder may incur, legal protection insurance will also protect the insured by providing cover for any award of the adverse party’s legal costs. However, most policies will impose a limit on the total cost cover available.

    Legal protection insurance can be purchased alone or can be added to another product, e.g. motor policies, household policies, etc. When the legal protection policy is sold in addition to another main insurance, coverage will be provided for disputes arising in the area covered by the main contract.

  • Why should I take out legal protection insurance?

    Nowadays, people increasingly need legal protection and assistance to solve common disputes and actively defend and enforce their rights. Actually, the number of conflicts or claims that people have to deal with has been constantly growing, e.g. conflicts over consumer rights, motor vehicle disputes, labour law, etc.

    Furthermore, the costs, length and complexity of the legal environment usually stop people from seeking to obtain justice. People are afraid not only of the costs, length and uncertain outcome of court proceedings, but also of the costs of addressing legal experts. As a consequence, a lot of people do not even try to assert their rights. By contrast, those who take out legal protection insurance will be helped and assisted by their insurer who will offer legal advice either directly or through an external lawyer.

    Moreover, a legal protection insurance policy will cover both the costs of the insured person and those of the adverse party should the insured lose the dispute in court.

  • Doesn’t my third party liability insurance cover legal costs?

    Third party liability insurance is designed to cover you against losses resulting from your acts or omissions that are negligent and that result in damage to another person, his/her property or legitimate interests. In other words, third party liability insurance will reimburse other parties’ damages which were caused by your negligent act. Thus, the main scope of third party liability insurance is to protect other parties from the consequences of your wrong-doing. Your property and interests are not protected except against being held liable for the other parties’ damages. For example, your liability insurance will pay for your legal defence costs if you are sued as a result of your involvement in an accident and, consequently, the liability insurer would be affected negatively as well. It would not help you to seek justice as a plaintiff in case you were the wronged party.

    As opposed to this, the only aim of legal protection insurance is to enforce your rights, protect you, your interests and property, thus it will provide legal advice and cover the legal costs of a dispute regardless of whether any act of negligence is involved.

  • Will my legal protection insurer help me in cases of cross-border conflicts?

    Normally, your insurer will provide legal advice on most legal questions you might have.

    Sometimes only disputes arising within certain countries will be covered by your legal protection insurance.

    However, if your policy is limited territorially, the contract will precisely define which countries are included and in which circumstances.

  • Do I need legal protection insurance if there is legal aid available?

    In most states legal aid is available to ensure that effective access to justice is provided to everyone, especially to those who have particularly low revenues. Where legal aid is provided a lawyer will be appointed, normally by the court, to assist or represent people free of charge. Unfortunately, not only is legal aid usually confined to an increasingly small number of people who satisfy a strict means test, but in most cases legal aid covers only the costs incurred for cases brought before a court. Consequently, it covers neither out-of-court settlements nor the costs of legal advice.

    Those who worry about not being able to obtain justice because they cannot afford the prohibitive costs of going to court and/or will not benefit from legal aid should consider taking out legal protection insurance. In fact, legal protection insurance is a relatively inexpensive mechanism for resolving a range of problems and legal disputes.

    The maximum revenue allowing one to qualify for legal aid in most EU countries can be found on the European Judicial Network in civil and commercial matters website.

  • How much does legal protection insurance cost?

    The premium for a legal protection policy can vary considerably from one country to another. It largely depends on the scope of the coverage, the application of deductibles and the existence and extent of any indemnity limit (maximum amount that will be covered). The premium can range from €8 per year, for a limited scope of application (e.g. consumer disputes linked to the use of a credit card) up to more than €200 per year for a complete cover.

  • When can I turn to my legal protection insurance?

    You can and should always contact your legal protection insurer to ask him how to proceed in case you have to solve a dispute or you are facing a legal problem. Your insurer’s services are always available during office hours, but many insurers provide guidance for their customers 7 days a week and 24 hours a day. The information provided by phone is always treated confidentially. Please remember that, in order to benefit from your legal protection insurance, you must inform your insurer of the existence of a legal dispute for which you want to claim cover. However, be aware that your cover might not include certain disputes. In this respect, legal protection insurance works in the same way as any other insurance, e.g. in case of a car accident, the insured must always inform the insurer if he wants to use his guarantee. If you have contacted a lawyer before informing your insurer about a dispute, make sure that you tell your lawyer that you have a legal protection insurance policy. In this case either you or your lawyer should contact your legal protection insurer immediately.

  • What are the different kinds of legal protection insurance?

    There are basically two kinds of legal protection insurance and it depends on the tradition in each country which of the two is most common.

    Legal protection insurance as a stand-alone product

    Legal protection insurance can be bought as a separate and independent insurance product. In this case the cover will normally be wide, but the extension of the cover will vary according to the chosen contract. Your legal protection insurance may cover consumer disputes, labour disputes and sometimes even family law, etc.

    Legal protection insurance as an add-on product

    Legal protection insurance can also be purchased in addition to another insurance product such as motor or household insurance. In such cases the legal protection insurance will intervene only if the conflict is related to the area covered by the main policy. For example, if your insurance has been added onto your motor insurance policy, it covers disputes linked to the insured vehicle, and does not cover other disputes you might have.

    When sold in addition to another product, the legal protection cover must either be subject of another contract or be contained in a separate section of the main policy. In certain EU countries, the premium must also be indicated independently from that of the main insurance.

  • How does legal protection insurance work and are there differences between Member States?

    The Legal Expenses Insurance Directive (Directive 87/344/EEC of 22 June 1987, now Solvency II Directive 2009/138/EC) introduced several basic principles (e.g. internal company organisation systems, opportunity to have recourse to a lawyer and arbitration, etc.) and established at EU level how legal protection insurance should work. Members States were responsible for the transposition of the EU rules into national legislation and were in charge of the introduction of more detailed rules. Those detailed rules were introduced according to national legal and cultural traditions. Therefore, the sort of services that can be performed by legal protection insurers varies from one country to another: it ranges from the mere transfer of the financial risk of litigation (e.g. Germany) to the provision of legal services like representation in court (e.g. the Netherlands).

    In general, as soon as a dispute arises, you should always contact your legal protection insurer to receive advice on how to proceed. Depending on the scope of your contract, legal advice will be provided only in certain areas of law (e.g. labour law), or for any kind of dispute. In any case, you must always inform your legal protection insurer if you want to be covered for a certain dispute or if you want to be reimbursed for the legal costs.

    When permitted by national law, your insurer will assist you in settling your dispute either out-of-court or by taking it to court. Before addressing a tribunal, it could be preferable to try first to settle the dispute out-of-court. In general, out-of-court settlements are increasingly considered as the more efficient way to provide for citizens access to justice and avoid the length, costs and uncertainty of court proceedings. However, if a satisfactory out-of-court settlement cannot be reached then court proceeding will be initiated. Whenever permitted by national law, your legal protection insurer will assist and advise you throughout the entire dispute, from its start to its settlement, even by representing you in court. In case you do not agree with your insurer on the way your dispute or your claim should to be settled, you can always ask an arbitrator to solve the disagreement.

    Because of each country’s specific legal and cultural tradition, different types of legal protection insurances were developed. In Great Britain, for example, besides the typical BTE (Before the Event) legal protection insurance, which is underwritten before a dispute arises, there is also the so-called ATE (After the Event) insurance. ATE insurance is used to cover legal expenses in cases where the disputed event has already happened, nevertheless the costs of the court case have yet to be incurred or proceedings have not started. It protects clients from the risk of having to pay adverse costs and the costs of their own disbursements should the case fail. The policy will normally also provide cover for the ATE premium itself and this can be claimed back if the case is not successful. As already mentioned, ATE insurance is a particular feature of the UK market and is usually only available in cases where the chances of winning are high and the insurer is thus likely to be able to recover his costs from the other side.

  • Which legislation applies to legal expenses insurance?

    The core principles governing legal expenses insurance were established at EU level by the framework Directive 87/344/EEC of 22 June 1987 (now Solvency II Directive 2009/138/EC) while detailed rules were introduced at national level by Member States. The Directive defines only in general terms the extent of services that can be performed by legal expenses insurers and its main aim is to avoid, as far as possible, conflicts of interests between the policyholder and the insurer. A conflict of interest arises, for example, whenever the legal expenses insurer is covering both sides of a dispute.

    In particular the Directive contains the following provisions:

    • Minimum requirements for add-on products.
    • Three alternative internal organisation systems to be chosen by the insurance undertaking.
    • The right for the policyholder to access arbitration in the event of a disagreement between him and the insurer over the settlement of a dispute.
    • Precise rules and conditions governing the customers’ right to freely choose his/her lawyer.

    Because the Directive introduced only basic rules, and due to the deviations between national legislations, the range of services that can be provided by legal protection insurers differs from one EU country to another. In some countries legal protection insurers can only cover the costs of a dispute (e.g. Germany) while in other States they can even represent their insured persons in court proceedings (e.g. the Netherlands).

  • What rules ensure that legal protection insurance functions?

    Legal protection insurance is submitted to numerous laws with regard to insurance services and, in case legal services are provided, also to the rules governing their provision. Moreover, in each EU Member State a national supervisory authority monitors and controls the activities of insurers (the list of EU supervisory authorities is available at http://ec.europa.eu/internal_market/insurance/links/index_en.htm) and verifies their compliance with the relevant laws. In general, EU Member States have also introduced at national level an insurance ombudsman who is in charge of dealing with consumers’ complaints.

    Besides, customers can also control insurers’ activities by filing a complaint with the ombudsman or another national scheme competent for dispute resolution. This is always possible when customers have a complaint or a problem with their insurer. The responsible scheme will settle the case and their decisions are, as a rule, binding for the insurer. However, if the insured is not happy with the decision he can always pursue his complaint through the regular judicial procedure provided by national law. Furthermore, most insurers maintain an office to manage customers’ complaints or deal with their dissatisfactions. The insurer’s office will try to settle the case as quickly and efficiently as possible. Thus, this internal office helps insurers to better understand customer’s needs and collects suggestions to better serve the insureds.

    To sum up, the services provided by legal protection insurers are subject to many more external and internal checks and controls than those of many other service providers. This is one of the guarantees of the quality and accuracy of legal protection insurers’ services.

  • Besides legal requirements, are there other guarantees for the quality of legal protection insurance?

    RIAD members are actively engaged in enhancing and increasing the quality and accuracy of the services they provide. To stress their commitment RIAD members comply with the Association’s code of conduct and some national RIAD sections introduced additionally more detailed codes of conduct at national level.

    Furthermore, RIAD members have chosen individual ways to guarantee the quality of their services. Many insurers submit themselves to an external control of quality and have obtained certifications such as ISO 9001; ISO/IEC 27001, ISO 14001, etc. This ensures an independent supervision of their accounts, the traceability of their sources of finance and of the quality of the services provided.

    Most legal protection insurers have also an internal office to manage and monitor clients’ needs, claims and requests. They usually collect information on complaints to improve their services. Moreover, insurers regularly survey customers’ satisfaction and ask for suggestions.

    Legal protection insurers supervise how their products are sold and how customers are informed. Equally, legal protection insurers carefully select their brokers and intermediaries and ensure that all partners satisfy high quality standards. To this end, they may, for instance, conduct mystery shopping or apply other means of control.

  • How can legal protection insurance facilitate access to law and justice?

    Access to justice is considered a basic right. But enforcing one’s rights involves high costs, court proceedings take long and are stressful. Moreover, Governments have been reducing the budget dedicated to legal aid and consequently an increasing number of citizens are denied the financial means to pursue and enforce their rights. As a result, access to law and justice has become more cumbersome and for a large number of people dealing with the costs involved has become a major problem.

    In this situation legal protection insurers can offer a valuable solution: they give quality legal advice, support and attend to their customers needs during necessary proceedings and, last but not least, take the financial burden off citizens’ shoulders. All this is offered for a relatively low annual premium.

    Thus, legal protection insurers provide their customers with the fundamental means to pursue their rights which essentially facilitates their access to justice.

  • What is necessary to ensure that legal protection insurers can maintain their position as facilitators of access to law?

    An important feature of legal protection insurance as facilitator of access to law is that people can afford it and that it is available for everybody. Therefore, the legal and operational environment of legal protection insurance must be kept as simple and flexible as possible. Burdensome and costly restrictions should be avoided because this would ultimately result in an increase of premium rates which would be detrimental for those seeking access to justice.

  • Why can legal protection insurers provide the best possible out-of-court settlement for their customers?

    In general, an increasing interest for out-of-court settlement can be observed. Legislators, at national and at EU level, are giving more and more importance to alternative dispute resolution systems, for example mediation. Mediation is very often considered very efficient as it allows resuming dialogue between parties and because it enables to negotiate solutions which are acceptable for both parties. On the contrary, when parties decide to go to court they typically get locked into a logic of conflict and confrontation; where one party is winning and the other is losing.

    If national law permits the insurer to represent his clients out-of-court, he will provide an expert who will help to settle the dispute. Normally legal protection insurers’ professionals have developed a particular expertise and have acquired a deep knowledge of the disputes most typically covered by insurance policies. These experts are skilled in conducting negotiations in several sectors. Therefore, they are capable of assessing the different circumstances, responsibilities and possible outcomes of a dispute in the most effective way. Moreover, if you need an expert opinion, for example from a doctor or from an architect, your legal protection insurer will suggest such a specialist to support your claim.

    Some RIAD members organise training for mediators and all constantly invest in training their professionals to ensure that their knowledge is always up-to-date.