Power Report: When your legal cover leaves you exposed

We've all seen those testimonial-laden TV adverts for legal insurance. Clients singing the praises of the insurer after being rescued from an unscrupulous creditor, dodgy used-car salesman or dingy jail cell.

The glowing endorsements are interspersed with smooth-talking suits standing in courtrooms espousing the benefits of having your very own lawyer on call.

Playing on our fear of ever landing on the wrong side of the law, insurers promise access to top legal services, including specialist litigators, 24 hours a day, seven days a week. They promise to have our backs, whether our troubles involve criminal, civil or labour crises. And all for a nominal monthly fee.

It's a no-brainer, surely? Well, not exactly. All may not be what it seems.

The terms and conditions - and, more notably, the exclusions - of legal insurance in general are wide-ranging. And the devil is truly buried in the details, those tedious reams of copy that suppliers rely on consumers never to read. Until it's too late.

For starters, none of these plans offers blanket protection against all criminal, civil and labour matters. Some cheaper policies even exclude whole categories of law, such as labour and criminal.

And those that do cover all three carry significant exclusions. So, for example, you'll be assisted with your divorce, as long as your spouse isn't contesting it; you'll be helped if someone is suing you for defamation, but not if you want to sue for defamation.

Other family matters, such as maintenance and custody issues, are also usually excluded. As are business-related matters, tax, class actions, landlord rights and traffic offences.

And if the small claims court has jurisdiction, you'll often be referred there. This court doesn't allow legal representation.

As for criminal charges, that's when things get very sticky. Some policies exclude help if a policyholder is accused of a violent crime, including assault, murder, rape, child abuse and kidnapping. Cover for other, lesser crimes is only given if the policyholder hasn't been charged or convicted of the same crime in the previous two years.

Other insurers cover any serious criminal offence, including violent crime, as long as the same crime has not been committed in the previous six years. Less serious offences usually have a three- or four-year history clause.

And don't think your insurer will cover bail at any amount for any offence. The crime usually has to be "minor" and the cut-off amount paid can be as low as R3000. So despite having legal cover for bail, you may still be left to languish in prison until trial.

Then there's a clause, common to this kind of cover, that gives insurers the perfect out when faced with claims for "iffy" legal representation.

It states that legal expenses will be paid only if the matter has a "reasonable prospect of success".

It's exactly the clause Clientèle Legal used to turn down reader Eliza Pienaar's claim. The 58-year-old billings manager wanted legal representation at the Commission for Conciliation, Mediation and Arbitration after being dismissed - unfairly, she alleged - in September last year.

Clientèle, which had assisted with advice following her suspension in May, declined to provide a lawyer to represent her at the CCMA after her dismissal, saying her case had "poor prospects".

Pienaar continued her fight regardless and, following a failed attempt at conciliation, had her matter referred to arbitration. With the help of an attorney she hired for R3000, the case was settled on the day of the scheduled arbitration before the hearing got under way, with Pienaar securing three months' salary.

Pienaar, who had neglected to read the Clientèle fine print, demanded the company refund the premiums she has paid for the past five years - R175 a month at last count. When this was refused, she complained to me.

"What is shown on Clientèle Legal's TV ads seems so simple," she said. "But I've been so disappointed."

Clientèle MD Laurence Balcomb said the company reserved the right to repudiate cover. He said Pienaar's actions after her suspension had "compromised" her chances at the CCMA.

"In our opinion, Mrs Pienaar's case lacked merit ... we opted not to represent on this basis," said Balcomb.

He said that in cases where claims were declined and the client went on to win at the CCMA, the usual practice was to refund the legal costs. But this was an "internal practice and not a condition contained in any policy wording".

So why wasn't Pienaar refunded then?

"The matter was not formally adjudicated at the CCMA ... it was settled prior to the formal arbitration process commencing, without a formal award in [the] client's favour," said Balcomb. "It remains our opinion that if the matter had been formally adjudicated, the client would not have been successful."

He said Clientèle had, since the complaint, sought a second opinion from an external labour specialist, who was in agreement with the company's stance on the case.

He said Pienaar's complaint warranted neither a refund of premiums nor payment of the legal costs she incurred.

Despite this, he said, "understanding her situation", Clientèle would offer Pienaar R3000 as an "ex gratia payment".

"Mrs Pienaar is well within her rights to refer this matter to [Clientèle's] independent arbitrator and/or the FAIS [Financial Advisory and Intermediary Services] ombudsman," he said.

Clientèle Legal, which has opted not to be a member of the voluntary Short-Term Insurance Ombudsman scheme, is bound by the determinations of the FAIS ombudsman and the Financial Services Board. The company also offers life plans, funeral plans and hospital plans.

Pienaar, who has lodged a complaint with the financial services ombudsman, has since cancelled her legal and funeral policies with Clientèle.

"It's not about the money but the way Clientèle handled my case ... it seemed my employer was represented better here than me as their client."

Pienaar's tale doesn't mean that paying between R40 and R300 a month for legal cover isn't worth it. But it highlights the importance of knowing what you're paying for.

Pienaar herself admits it wasn't all bad; when she had problems with difficult creditors, Clientèle stepped up to the plate. And alongside the 400-plus complaints against legal insurers on HelloPeter, there are at least 100 entries that tell a different story.

No doubt they're the cases used so effectively in the TV ads.

Contact Megan Power

E-mail: consumer@sundaytimes.co.za

Follow Megan on Twitter: @Power_Report

Tune in to PowerFM 98.7's 'Power Breakfast' (DStv audio channel 889) at 8.50am on Monday to hear more from Megan

Please note: Other than in exceptional circumstances, readers sending me complaints must be willing to be identified and photographed.