Legal costs not covered by insurance

Bridget runs an importing company supplying supermarkets and department stores. Bridget received a letter from a competitor’s lawyer accusing her of breaching their copyright on a product that Bridget supplied.

Bridget contacted her insurer who accepted the claim, and the insurer took over the dispute with Bridget’s competitor. The insurer told Bridget that they would be covering their own legal costs. However, if Bridget wanted to obtain her own legal advice, she would have to do so at her own expense.

Bridget decided to ask her lawyers for their opinion on the case. At the insurer’s request, Bridget sent all the information she received from her lawyers to the insurer’s lawyers.

The insurer’s lawyers responded to Bridget’s competitor. In parts, the insurer’s lawyer’s response copied, word for word, the document Bridget described as her lawyer’s opinion.

The insurer’s lawyers were able to negotiate a very successful outcome to the dispute between Bridget and her competitor.

Bridget then contacted her insurer and asked them to pay for her legal advice, approximately $16,000. The insurer declined, denying that their lawyers had relied on Bridget’s lawyer’s opinion, and reminding Bridget that they had told her that her own legal costs were not covered. However, the insurer offered to contribute $5,000 towards Bridget’s legal advice as a goodwill gesture.

Bridget rejected the offer and complained to FSCL.



Bridget said she knew that the policy did not cover her legal expenses but said the insurer had relied heavily on her lawyer’s legal opinion and had saved themselves money as a result.

The insurer responded that their lawyers had used all the arguments available to achieve an excellent outcome but had never seen Bridget’s lawyer’s opinion.



The document used by the insurer’s lawyers that Bridget described as her lawyer’s ‘’opinion’’ certainly contained some track changes made by Bridget’s lawyer. However, the document was not a formal opinion, as it was not on letterhead. The information also did not seem novel as it appeared to be based on arguments already available to the insurer’s lawyer, either directly from Bridget or from a third party’s legal advice.

We could understand Bridget’s annoyance, because the insurer’s lawyer did appear to have copied some phrases word for word from her lawyer. However, the document Bridget referred to as her lawyer’s opinion contained information already available to the insurer’s lawyers from other sources. It was difficult to establish the exact provenance of the document, but it likely contained information from a number of sources.

We strongly encouraged Bridget to accept the $5,000 goodwill gesture offered by the insurer, but she refused to do so. Bridget maintained the view that the only fair outcome was for the insurer to pay all her legal costs, being $16,000.



As there was no legal obligation on the insurer to pay Bridget’s legal costs, Bridget had not suffered a direct loss as a result of the insurer’s actions, and we had no basis for requiring the insurer to pay any compensation to Bridget. We recommended that Bridget discontinue her complaint. Bridget said she would pursue her claim in the Disputes Tribunal.


Insights for consumers and participants

We were pleased to see the insurer taking a resolution focused approach to this complaint. However, we can only recommend that a participant compensate a complainant for direct loss or inconvenience. In this case, the insurer had properly declined Bridget’s claim, so she had not suffered a loss, and we could not recommend that the insurer pay compensation.