Legal Cost Insurance

Legal cost insurance comes in two forms: 1) Before-the-event Insurance (BTE); and 2) After-the-event Insurance (ATE).

Before-The-Event Insurance

This type of insurance responds to unforeseen legal events that pop up. Just like any other insurance, you buy it to protect you from misfortune.

BTE is available for individuals and for businesses. Usually, small to medium-sized enterprises take advantage of this offering because these businesses don’t have the budget to support an in-house legal department.

One great feature of BTE insurance is over-the-phone legal advice on any legal question or issue. However, the lawyers will not provide actual legal opinion or review documents. It’s limited to general legal advice on a particular issue. This is particularly helpful in managing risks associated with your private affairs or business.

Such policies range between $1000-$2000 for $200,000 of coverage. It covers most legal expenses except for the cost of damages you may have to pay if you’re unsuccessful in your case.

The Canadian Bar Association sees BTE insurance as a “way for regular Canadians to be able to afford to protect themselves and to enforce their legal rights and claims” given the high cost of legal services.

In 2014 DAS Canada reported that 63% of survey respondents indicated that the cost of seeking legal advice is the main reason they wouldn’t meet with a lawyer to discuss a legal situation they face, and half of those surveyed don’t feel they have the resources to hire a lawyer. So, the cost of legal services is clearly a barrier to access to justice.

After-The-Event Insurance

This type of insurance protects the insured in the event that the insured loses the case. It covers the disbursements the insured’s lawyer incurs in pursuing the action, and it covers the adverse costs the court may order the insured to pay.

Here’s the catch. ATE is limited only to contingency cases because “the insurance is basically underwriting the lawyer’s judgment, so the insurance company wants the lawyer to have a vested interest in the litigation proceeding. In essence, the willingness of the lawyer to take the case on a contingency basis amounts to the lawyer determining the matter has a reasonable prospect of success.”

Now the question is, well how much does it cost? Interestingly enough, the costs are deferred until the conclusion of the action, and it is paid ONLY IF the insured prevails in the lawsuit.

Interested in the rest of the story? Read more from the article here.