Home insurance policies paying out for employment tribunals

Jun 24 2009 by Tom Scotney, Birmingham Post

There has been a rise in the number of employment tribunal claims being backed by home insurance policies, according to law firm Pinsent Masons.

Legal expenses insurance, to cover to cost of taking legal action in relation to an employment dispute, is usually sold as an add-on to home insurance, generally for a small extra premium. Occasionally it can be included free within the terms of such policies. It is also possible to buy standalone policies, although these are less common. 

Policies can provide legal expenses cover in the event of an insured individual bringing employment tribunal or court proceedings against their former employer. Often these policies are contained within the benefits of a home insurance policy that a number of eligible claimants are not even aware may be available to them.

Charles Rae, a senior associate in Pinsent Masons’ Birmingham employment team, said: “We have recently noticed a large increase in the number of claims being brought against former employers by individuals whose legal fees are covered by legal expenses insurance.

“Often employees are unaware they even have such insurance cover, which can be tucked away as one of the extra benefits, sometimes provided for free, as part of their home insurance policy.”

“It is probably a sign of these tough economic times we are facing, that more former employees are prepared to search out different ways to fund litigation. Legal expenses insurance cover within home insurance policies has often been overlooked in the past, but the awareness of such policies has increased as more people find themselves embroiled in employment disputes.”

“A downside for employers is former employees often think they have nothing to lose, as they are able to bring and continue legal proceedings without having to pay their own legal fees.

“This can act as a barrier to discussions aimed at trying to settle employment disputes.”

“However, it is not always one way traffic. Such policies generally have a number of conditions attached to them, such as a cap on the amount covered or a requirement of the insured to seek the prior approval of the insurer if they intend to reject an offer of settlement.”