Third party liability, legal expense and business insurance policies

Expenses covered by legal expenses insurance

The legal expenses insurance covers costs incurred by the insured for civil and penal cases or non-contentious civil cases (petitions). The insurance will cover litigation costs and those incurred for the use of legal counsel.

In civil cases, the insured event is the origin of a dispute. A dispute is deemed to originate, for example, when a claim in a case has been denied either in terms of amount or grounds. In penal cases, the legal expenses insurance covers costs in situations where the insured is the injured party, i.e., the victim of the crime. In the insured is the defendant, i.e., the accused party of the penal case, the legal expenses insurance does mainly not cover the litigation or legal expenses.

For the compensability of the expenses, it is required that the case could have been initiated at a district court. If the dispute is agreed upon without a trial, some insurance companies will cover the cost to the maximum of half of the insured amount.

Exclusions to the scope of compensation of legal expenses insurance

The legal expenses insurance included in the home insurance will cover costs in cases where the insured incurs expenses as a private person. The expenses related to the work or business operations of the insured will normally not be covered.

As concerns property units or apartments other than the permanent home or holiday home in private use by the insured, the costs incurred for the use of a lawyer or litigation costs will normally not be compensated. This exclusion of the scope of coverage thus relates to expenses caused by a disputes related to an investment apartment owned by the insured. However, certain insurance policies will cover issues of one or two apartment owned as an investment.

The legal expenses insurance policies do not cover costs related to divorce situations. Expenses related to child custody, maintenance and visitation rights are excluded by the policy terms.

The legal expenses insurance does not cover expenses in issues handled by administrative authorities or special courts of law, such as the Administrative Court or Insurance Court. The policy terms may also include other exclusions; for example, the counterpart legal expenses to be paid by the insured as per the respective sentence will not necessarily be covered.

Claiming compensation from legal expenses insurance

The claim related to the legal expenses insurance must be made in advance. In other words, the insurance company must be notified in advance about the expenses to be incurred. The insurance company must also be informed about the type of case at hand. After this, the insurance company will decide whether the legal expenses insurance will compensate for the costs incurred.

Continuous validity of legal expenses insurance is important

The legal expenses insurance covers expenses where the insured event, for example the dispute arisen, has taken place while the insurance was in force. If the insurance has been in force for less than two years, the event or circumstances constituting the basis of the dispute or accusation, must have emerged within the period of validity of the policy. This period of validity means the uninterrupted validity of the legal expenses insurance in the current or the previous insurance company. It is therefore important, that the validity of the policies is not interrupted, for example, when there is a change of the insurance company.