A new type of insurance policy has arrived in B.C. that addresses the inaccessibility of the justice system for small businesses and the average consumer.
Until recently, there have been few insurance policies in Canada that cover legal expenses.
According to DAS Canada, a new subsidiary of a German company that just set up shop in B.C., the entire Canadian market for legal expense insurance is between $10 million and $15 million in premiums annually.
DAS Canada’s market research has the company forecasting to be writing more than $70 million in premiums for legal expenses to up to 300,000 business and consumer customers in 10 years.
The company’s so bullish about the Canadian market because it believes court costs have become so high for Canadians they are now a risk for which it’s worthy to have insurance.
According to a 2010 survey by Canadian Lawyer magazine, the average hourly rate for a Canadian lawyer is $360.
The survey found a two-day civil action trial in Canada, on average, costs $26,444.
“It is expensive to access justice, and people don’t necessarily know how to navigate their way though it,” said Barbara Haynes, CEO of DAS Canada, during the company’s official B.C. launch in Vancouver last week.
Standard property and casualty insurance policies for homeowners and businesses cover some legal expenses, but coverage is limited and only acts as a defensive mechanism against certain actions.
For example, homeowners and businesses are often covered in typical scenarios in which someone sues them for injuries suffered from a slip and fall on their property.
But there is no coverage under those policies for many other defensive or offensive actions a business or consumer may find themselves caught up in.
For example, holders of DAS Canada’s legal expense insurance are covered for the defence of legal actions such as a wrongful termination suit brought forth by a former employee or a contract dispute brought forth by a supplier.
As well, DAS Canada provides coverage for holders who find themselves on the other side of those same actions – when holders may find it necessary to sue an employee for a criminal action or a distribution partner for debt owed.
That coverage includes lawyer costs and the disbursement costs that may be required in court for things such as medical reports or expert witnesses.
And in the event your case is not successful and the court awards adverse costs against you, DAS’ policy will also pick up those costs.
The policy also provides free unlimited legal advice. So, for example, a business can call a DAS lawyer for guidance before going into a performance meeting with a troublesome employee.
Its policy for businesses is designed particularly for small and medium-sized businesses that likely don’t have in-house legal counsel or a dedicated human resources department familiar with labour laws.
For a business with an annual payroll of roughly $350,000, DAS’ legal expense insurance costs roughly $1,800 annually.
The policy provides up to $200,000 coverage on any single action or up to $1 million a year.
DAS’ business policy also covers costs related to tax audits by Revenue Canada.
It offers similar policies to consumers and vehicle owners.
DAS Canada is part of the DAS Group, which is an 80-year-old German firm that specializes in legal expense products and is owned by a large international insurance group.
The DAS Group is the largest legal expense insurer in Europe, where €7 billion in insurance premiums are doled out for legal expenses annually.
Interestingly, Europeans have been using legal expense insurance since the early 1900s, when it was created to address the many complicated legal disputes that occurred between accident-prone race-car drivers in the 24-hours Le Mans race and their insurers.
In Sweden, legal expense insurance is mandatory.
With the European market saturated, DAS Group is looking to expand into new international markets such as Canada and South Korea.
It has provided DAS Canada with $25 million in capitalization to expand across Canada.
Since DAS Canada set up shop in Toronto last summer, DAS Canada has trained and recruited roughly 200 independent brokers to sell its insurance.
Its regional office for B.C. and Alberta is in Vancouver.
Roughly 15 brokers in B.C. are currently rolling out DAS coverage.
Evan Li, owner of Burnaby’s Metrotown Insurance Services Ltd., cited a recent court case involving a client to highlight why he is beginning to sell legal expense insurance.
His client was named as a defendant in a dispute between two neighbours over the encroachment of a fence on one of the neighbour’s property.
“At end of the day, the award was $1,500, but legal fees over the years for my client were $15,000,” said Li.
During a recent speech, B.C.’s chief justice Lance Finch recommended B.C. drastically increase the number of lawyers being called to the bar each year in order to address an imbalance between the demand for legal services and the supply of lawyers.
That imbalance, said Finch, has contributed to higher court costs.