LEGAL AID MEANS TESTING PUTS SPOTLIGHT ON COURT DEFENCE COSTS EXPOSURE

The introduction of financial means testing to assess eligibility for free legal representation in magistrates’ court and Crown Court cases, was included as part of the Legal Aid, Sentencing and Punishment of Offenders Act (LASPO) in April 2013.

Under this system, individuals with a net annual income of £22,325 or above are not eligible for legal aid in magistrates’ court cases. In addition, those with an annual household income of £37,500 or more, do not have an automatic right to legal aid for Crown Court cases.

These limits, when considered against available statistics on annual incomes in the UK, reveal the potential extent of their impact on access to legal aid. According to the Office for National Statistics, the average annual earnings of full-time workers in the UK in 2012 was £26,500* and other research that year showed that over 3.7million people earned £35,000 or over per annum**. 

These figures suggest that, on a conservative estimate, somewhere in the region of 14% of households in the UK could have access to legal aid removed.  This figure could be even higher when the levels of employment and full-time weekly earnings growth are taken into consideration.

The use of means testing in defence of criminal cases could mean that many more individuals would not be eligible for legal aid. As a result, they would be exposed to the costs of defending a criminal prosecution at either the magistrates’ court or Crown Court. 

Court cases and defence costs

The level of costs a defendant might face in either court can be significant, ranging from a maximum of nearly £7,000 for a burglary case, to over £185,000 in a murder case.

Examples of maximum defence costs are shown in the table below:-

In the most extreme circumstances, those who end up being wrongly charged with a criminal offence may be forced to liquate capital assets such their home, to compensate the necessary level of legal representation at a trial.

Role for insurers

The Government has expressed a desire for the insurance industry to ‘step in’ and plug the funding gap, by providing individuals with protection against these potentially crippling costs. The 2010 Ministry of Justice legal aid reform proposals strongly indicated their support for the use of insurance as a way of bridging such a gap.

“The Government agrees that a greater use of insurance in some cases…presents an affordable and feasible alternative to publicly funded legal aid for funding legal protection, and would welcome the development of a market in this area.”***

Extending access to cover

We continue to actively respond to changes, and are now able to include access to Criminal Prosecution Defence cover as an enhancement to our Family Legal Expenses Insurance product, or as part of a specialist affinity group scheme.

The policy provides cover for legal advisers’ costs to defend criminal proceedings in the magistrates’ court, including making an appeal against a conviction or sentence.

For Crown Court cases, where the insured is committed to stand trial and is assessed under the Crown Court means testing scheme, the policy will pay a sum equal to the assessed contribution payable towards the costs of their defence. 

This move is part of our commitment to developing existing products to maintain their relevance, and address the new and emerging risks faced by our clients’ customers. The insurance industry needs to place more emphasis on developing products to offer this kind of cover, and Arc Legal is delighted to be at the forefront of taking this area of insurance forward.

Please note that this is a brief description of the cover available. For details on the full cover and key exclusions, please contact your account manager.

* The average annual earnings of full-time workers in the UK rose by 1.4% to £26,500 in the year to April 2012. Published by the Office for National Statistics in its annual survey of hours and earnings.

** Sourced from http://www.thisismoney.co.uk/money/news/article-2107031/UK-Budget-2012-Top-1-earners-contribute-income-tax.html

*** Proposals for the Reform of legal aid in England and Wales November 2010