Legal disputes can disrupt any business, large or small, and the subsequent legal expenses can be costly. In fact, a two-day civil trial can cost upwards of $26,000. Often, businesses may have to pay for these legal expenses out of pocket, which, in turn, could negatively impact their bottom lines or worse, push them into bankruptcy. To protect themselves, more and more Canadian businesses are purchasing commercial legal expense insurance (LEI).
LEI is standalone insurance designed to protect policyholders from the costs and hassles of legal action brought on by or against policyholders.
Generally, businesses carry commercial general liability (CGL), directors and officers (D&O), employment practices liability (EPL), and errors and omissions (E&O) policies to cover the costs of legal action. However, these types of policies are often insufficient and designed only for specific issues.
In contrast, LEI kicks in following a legal dispute and is meant to fill gaps in coverage. LEI covers the majority of the common legal risks businesses may face. Specifically, LEI covers legal costs associated with the following seven main categories:
- Employment disputes
- Legal defence
- Contact disputes and debt recovery
- Statutory licence protection
- Property disputes
- Bodily injury
- Tax protection
As an added benefit, when a business purchases an LEI policy, it may also gain access to a legal helpline, which is staffed by attorneys and other experts. Companies can use this helpline to ask questions about any business-related legal matters, including tax advice. This is meant to guide policyholders through tricky situations and prevent legal trouble before it occurs.
It should be noted that each of the categories listed about has its own set of subcategories, so it’s important for businesses looking to purchase LEI to do their research.
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