The purpose of legal expenses insurance is to cover the legal fees charged by a lawyer representing the insured in an insurance event. The right to coverage arises when there is a dispute, such as a claim or charge that has been disputed.
Legal expenses insurance indemnifies only insurance events occurring during the validity of the insurance. However, there is usually a precondition that the insurance policy must have been also valid for at least two years at the time of the insurance event and that the particular matter which the dispute is based on must have been happened during the validity of that insurance. This can be especially problematic when ending business activities.
In a recent decision the Vaasa Appeal Court stated, that such insurance condition was not unreasonable. In the case a pharmacist sued the insurer after the insurer rejected the pharmacist’s claim, which was related to a former employee’s workers’ compensation claim presented after the pharmacist had retired and ended his business activities and terminated legal expenses insurance at the same time. The Court stated that, inter alia, when the insurance contract was concluded the pharmacist had been provided with the insurance conditions, which were not exceptional.
Partner Matti Komonen from HPP Attorneys Ltd has written an update on Finnish legal expenses insurances and the Vaasa Appeal Court decision. The update titled “Validity of legal expenses insurance” has been published in the International Law Office’s newsletter.