As part of many, but not all, business insurance policies, you can have separate cover for commercial legal expenses.
It is quote an important distinction, but the title tells you exactly what you get, which is legal expenses. For any policy, in the UK, insurers always have the option of taking control of any claim. What this means is that, if they want to they can appoint their own builder to fix your roof, supply to replace your sofa or solicitor to fight any legal costs claim against your business.
Legal expenses does not mean that you can appoint the most expensive barrister and their legal team in the land, to fight any and every dispute you may have. What it means is that as soon as you become aware of the likelihood of a claim being made against you, you need to notify your insurers and let them decide what they want to do.
It may well be that they come back to you and ask you to get a fee quote from a local solicitor, but, in over 95% of cases, what they will do is to appoint a solicitor from a panel that they have worked with before and have agreements with. This way, the insurers are fully aware of what the costs are likely to be and the solicitors are used to dealing with claims of this type.
One of the major parts of commercial legal expenses insurance, is employment disputes. There are hundreds, if not thousands of employers every month who suddenly realise that a relationship, that they had with an employee, has deteriorated to such a degree that they may have to go to a tribunal.
To be fair, the legal system is OK in that it forces employers and employees to go through a formal greivance process before it gets to court. But boy, if you do not resolve it at grievance stage, then the costs will start to rack up.
This is where a) you want to have a policy that backs you up and b) your insurers are not going to just send an open cheque to pay a huge solicitors bill.
As with every single claim, you must, must, must notify your insurers, or indeed your broker, as soon as you aware of anything which may give rise to a claim. Even if you think there is a 0.1% chance of that bad appraisal with employee x turning into a full blown three week employment tribunal, you have to speak to someone about it. If in doubt, get on the phone.