David Chen, the Toronto grocer forced to fight criminal charges over his “citizen’s arrest” of an alleged shoplifter, racked up tens of thousands of dollars in legal fees to clear his name last year.
Those bills make him an example of someone who could have benefited from what is known as “legal protection insurance,” says the head of a company trying to sell Canadians on the concept.
The idea is simple. You pay an annual premium, starting at $360, for access to a hotline that offers advice for common legal problems and a lawyer if you need to go to court, to a maximum of $100,000 per claim and $500,000 a year in total.
DAS Legal Protection Insurance Co. Ltd., a subsidiary of German reinsurance giant Munich Re, has been offering the policies since last year. Barbara Haynes, DAS Canada’s chief executive officer, points to small business operators like Mr. Chen, who became a became a cause célèbre before being acquitted, as potential customers.
“Really what we’re about is providing affordable access to justice,” Ms. Haynes said in an interview. “Certainly if you talk to the law societies or the bar association they’ve got access to justice very high on the agenda.”
The whole notion of legal insurance for consumers is, with some exceptions, a foreign concept in Canada, despite its popularity in Europe and the U.S. Legal protection insurance is included in some Canadian Auto Workers’ and other unions’ contracts, and the provision of similar insurance coverage in Quebec is co-ordinated by the profession’s governing body, Le Barreau du Québec. But otherwise, it is largely unknown here.
DAS sees Canada as an untapped market for its business. Observers in the legal profession, while generally positive about the concept, caution that it is no panacea for the problem of access to the legal system and is not without pitfalls.
The insurer’s customers can tap into a legal advice line that draws on about 850 lawyers across Canada. Lawyers will draft letters for customers, give them advice, and represent them in court if necessary.
DAS’s marketing materials sell the product as “affordable” justice for the middle class, which is too wealthy for legal aid but not wealthy enough to pay large legal bills: “It’s more than a policy; it’s empowerment, knowing you have access to legal counsel and expense coverage when and if you need it.”
But there are many provisos, including deductibles and waiting periods. And, before DAS will proceed with a civil suit, its own lawyers must believe that there is at least a 51-per-cent chance of success. Plus, the policy excludes family law, so it does not cover divorces or child-custody battles.
The company also offers special policies for drivers - which will see its lawyers fight traffic tickets - and small businesses. Premiums vary, but the company says that a business with revenue of about $700,000 tends to pay roughly $600 a year, plus an additional $500 for contract-dispute and debt-recovery coverage.
It’s all cheap compared with covering legal costs yourself, with the average hourly rate for a lawyer with 10 years experience at more than $300. Ms. Haynes lists off countless scenarios in which the coverage would come in handy: obtaining a severance package after being fired, feuding with a neighbour who plays music at 3 a.m. every night, seeking compensation for a slip and fall, or fending off an audit by the Canada Revenue Agency.
The legal-protection insurance industry in Europe takes in roughly $11-billion in premiums a year, said Jochen Messemer, chairman of ERGO International AG, the Munich Re subsidiary that owns DAS. By comparison, Canadians are buying roughly $11-million to $12-million worth of coverage a year, DAS says.
