Luxury or necessity?

Is legal protection for business a luxury purchase? The simple answer is, not any more. With a legal claim more likely than a fire claim, commercial legal protection insurance is something that all businesses should be advised about.

The legal risks a business faces are numerous and to make matters more complicated, these risks alter as the law changes.

The changing nature of these exposures means efficient access to appropriately qualified advice as well as insurance cover should be a priority. How else are affected businesses going to be aware of the law?

Ignorance of the law is no defence.

Every business will face some or all of the following risks each requiring the services of professional lawyers or advisers to resolve or avoid a problem:

When buying or selling goods or services there is a risk of a contractual dispute with the supplier or customer. The more money involved, the bigger the incentive to fight about it.

When businesses are involved in areas regulated by health & safety laws, each rule and regulation appears to add to the red tape a business has to deal with, requiring more record keeping, more risk assessments and, ultimately, more risk of getting it wrong.

When dealing with employees, the seemingly endless obligations of employers to their employees means there is a lot of room to get it wrong. Many employment laws are about making things happen in a procedurally correct manner. It is incredible that every business should be expected to keep up to date with these rules.

When dealing with HM Revenue and Customs, if the revenue authorities investigate a businesses tax affairs it can lead to a protracted process of justifying an accounting approach and a costly additional tax bill.

When dealing with your property or landlord or tenant there can be legal expenses. Property is often a businesses most valuable asset either because it owns it or requires it in order to continue to trade.

When dealing with a businesses licensing authority, society demands more and more regulation of more and more types of business. Even insurance intermediaries now require authorisation from the FSA to trade. Loss of a licence is a business-threatening event and a business needs to be able to appeal against the licensing authority's decision to remove the licence;

When detaining shoplifters awaiting the police to charge them there is a risk that the thief will claim to be illegally held.

When your staff are required to attend court to serve on a jury and paying them for that time, you have risks.

You also have risks when you are acting as a trustee of the employees' pension fund.

Risk management
The insurance sector has for years spoken about the need for and stressed the benefits of risk management.

Whisper it quietly, but are we just paying lip service to this in most instances? Most of the time prevention really is better than the cure.

Take the scenario of a business being faced with an employment tribunal action from a disgruntled ex-employee.

With legal costs escalating and the level of compensatory awards in employment tribunals inexorably on the rise, today's business can no longer afford to ignore the costs that will hit their bottom line.

But it's not only the physical cash cost that impacts, it's the management time taken out of the business to deal with the dispute.

For example, take a business which is taken to the tribunal by an ex-employee.

With the grievance procedure, appeals, witness statements and the tribunal hearing itself, it is quite conceivable that three senior managers would be taken out of the business for the best part of 20 working days.

The fact that the case may have had little merit in the first place and that the towel could be thrown in by the ex-employee half way through the tribunal hearing would be no real consolation.

It leaves a somewhat pyrrhic victory. What business opportunities were missed because three senior managers were diverted from their core tasks?

Good advice
Good professional advisers can cost significant sums of money, with solicitors charging hourly rates ranging from £150 to £250.

Commercial legal expenses insurance, with the provision of good commercial advice and insurance of legal costs in the event of a dispute, is a cost effective and realistic solution for business clients. They should have the following features and benefits: .

24 hour telephone legal advice to provide businesses with legal advice and information without having to pay a solicitor

A fully-professional experienced and qualified telephone team of legal advisors

A broad range of legal expenses covers

Flexible limits of indemnity appropriate for business clients

Be competitively priced.

Working for business
Commercial legal expenses insurance products that work not only for the business but also for the distributor are available and should, from the distributors perspective:

Be easy to administer

Allow flexibility when advising clients in accordance with FSA obligations

Provide added value to the client relationship

Deliver a meaningful income stream

Be supported by a professional, knowledgeable and helpful team of underwriters and account executives.

Commercial legal expenses insurance is no longer a luxury purchase, it is more a necessity - just like any traditional insurance purchase. IT

' Chris Ward is the managing director of Abbey Legal Protection.