Solution’s answer to SME’s legal costs
With everchanging regulations and an increasingly litigious environment, it can be difficult for small and medium businesses to keep on top of their legal obligations and compliance requirements. Faced with complex contracts, lease agreements and employment policies, without adequate advice, SME businesses can quickly find themselves in tricky – and expensive – situations.
What is legal expenses insurance?
Legal expenses insurance, sometimes known as legal costs insurance, is designed to provide insureds with access to legal advice for business matters and coverage for the legal costs of pursuing or defending legal action. It is designed to help businesses deal with unexpected legal issues not covered by their other insurance policies.
Who needs legal expenses insurance?
According to the NAB Australian Legal Services Industry Survey, SME businesses spend an average of $39,000 a year on legal services. Services are across a range of areas, but primarily employment/workplace law, commercial law, taxation law, insurance law and property law. Whilst some of these expenses are part of the day to day costs of running a business and are therefore unavoidable, a legal expenses policy may help businesses deal with any unexpected legal costs.
Simply put, as all businesses have exposure to legal issues, there is huge value in the cover for all industry sectors.
With the exception of solicitors, Solution can offer cover to all occupations. For some sectors, such as construction where disputes are quite frequent, cover can still be obtained with specialised terms.
What is covered?
This little policy packs a punch; it’s up there with some of the best legal expenses insurance offerings available in Australia. With seven ‘heads of cover’, Solution’s Commercial Legal Protection (CLP) coverage is broad and can respond to a variety of situations.
Contractual Disputes
Tax Audit
Statutory Licence Protection
Landlord Disputes
Restrictive Covenants
Third Party Damage to Goods or Premises
Debt Recovery
Contractual Disputes
covers legal costs associated with the alleged breach of a commercial contract, such as defending a claim made against the insured, as well as pursuing a customer for unpaid monies or suppliers following non-performance.
Examples include where the insured pursues a supplier over sub-standard goods they had purchased to sell on or where the insured defends a claim against them after they refuse to pay a hire company for faulty equipment leased to them.
Importantly, cover does not extend to any amount awarded against the insured, but is focused on funding the costs to enable the insured to pursue or defend the claim.
Tax Audit
covers the insured’s accounting costs to respond to an audit by the Australian Taxation Office (ATO). If the audit escalates into a dispute, the policy also extends to cover a specialist lawyer to represent the insured in any proceedings which may arise.
In addition to the expenses associated with a tax audit, this section also extends to the costs to respond to a claim from the ATO that additional GST or additional income tax or fringe benefits tax is due.
Statutory Licence Protection
covers the legal costs associated with protecting the insured’s rights under a statutory licence which is under threat of suspension, revocation or amendment and could have a material impact on their ability to conduct their business.
This section also affords expert legal assistance to challenge any attempt to suspend, revoke or alter the terms of the licence to the insured’s detriment.
Landlord Disputes
covers the legal costs arising from a dispute with a commercial landlord for an alleged breach of the lease, tenancy agreement or licence in place in respect of the insured’s business premises.
Where the insured is a commercial landlord themselves, this section covers costs arising from a dispute with a tenant for the same situations.
Restrictive Covenant Pursuit
covers the legal costs arising from a dispute with a former employee in relation to an alleged breach of restrictive covenant.
Restrictive covenants are a protective mechanism for businesses to protect against potential loss of clients and/or intellectual property in the event of an employee departure. This section ensures that where a restrictive covenant has been breached, specialist legal assistance is available to enforce the relevant terms, mitigating potential damage to the business.
Third Party Damage to Goods or Premises
covers the legal costs of pursuing a third party who causes damage to an insured’s premises, goods or property at the insured’s business premises, leading to uninsured losses.
Debt Recovery
covers the legal costs arising from a dispute relating to an unsettled invoice despite payment terms having expired. In the first instance, insureds utilise a specialist-crafted template letter. Should the third party continue to withhold payment, a debt recovery professional will then communicate on the insured’s behalf. Finally, should the invoice be still outstanding, the appointed debt recovery professional will issue court proceedings on the insured’s behalf.
Free legal advice service
Perhaps one of the most valuable features of the policy, the legal advice service is available to insureds without the need to trigger a claim under the policy. The service supports SME businesses to avoid potential issues and safeguard themselves against legal action. Whilst the advice service cannot prevent an action being brought against the insured, it can assist to ensure that the insured is able to comply with their contractual, legal and regulatory obligations. This is likely to help make matters arising more winnable or defendable, ensuring the policy is able to respond.
To access this service, complete a Legal Advice Query form and a qualified lawyer will be in touch with you shortly to provide the necessary advice. Please note, the service is available for all areas of Australian business legal advice other than intellectual property.