Legal expenses insurance
Insurance that pays legal costs and provides legal assistance to the insured in disputes with third parties, governed in French law by free choice of lawyer and management of conflicts of interest.
Legal expenses insurance provides the insured, for a premium, with payment of legal costs and legal services in a dispute with a third party: advice, pursuit of an amicable solution, then, if necessary, funding of legal action, lawyer, expert and bailiff fees, within the contract's limits and caps. It differs from the defense provided under a liability policy, which applies only when the insured is sued for a covered loss, since it also lets the insured act as claimant. French law regulates it closely in the Insurance Code: the insured's free choice of lawyer, a duty to inform the insured of this right, an arbitration procedure in case of disagreement over whether to bring action, and management of conflicts of interest when the insurer also covers the opposing party. For businesses, the cover addresses commercial, employment, tax or administrative disputes, and now extends to digital disputes, identity theft, online reputational harm, disputes with platforms. Its losses are driven by frequency, governed by average fee levels and the propensity to litigate.
Textbook case: a small company disputes a customer's refusal to pay for 60,000 euros of services. Its legal expenses policy first funds an attempt at amicable settlement, then, failing agreement, the action before the commercial court, with the lawyer it chose, up to a cap of 20,000 euros per dispute.
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