During the normal course of business, all businesses are exposed to the potential threat of claims being made against them in respect of their legal liability; these claims may come from third parties or from employees of the company.
Losses can appear on account of property damage, personal injuries or as a consequence of monetary loss suffered by the claimant on account of negligent advice provided by the company.
The latter basis is the subject of professional indemnity insurance or professional liability cover and it’s not the intention of the next few paragraphs to address these matters.
The cautious business owner or operator needs to ensure that they are protected against claims from 3rd parties in respect of their legal liability for property damage or personal injuries which has arisen out of and in the course of the business. This is the topic of third party liability insurance.
A third party liability insurance policy provides the policyholder cover against their legal liabilities for property damage and personal injuries, where such loss is alleged to have been caused by the policyholder in the course of the business.
It is essential to note that a significant aspect of the public liability insurance policy is the inclusion of defence expenditure incurred in the defence of a claims, whether the action be found to be the legal responsibility of the policyholder or not. The costs of mounting a legal defence is often great, even compared to the cost of many losses, and it is a vital insurance protection for policyholders that it’s included in the standard policy coverage.
As third party liability cover is a contract of legal liability, the basic policy wording remains similar from insurance company to insurance company, however you need to be aware of certain fundamental aspects of the cover to make sure that the cover meets the requirements of your business;
The Limit of Indemnity, this is the maximum amount of the insurers liability in respect of claims under the policy. This limit will be selected by you and will depend often on contractual requirements placed upon you by your employers.
The Business Description, it’s important that this accurately represents your business activities since it’s only claims that occur from your undertaking of this business description as well as the insurers reasonable understanding of the trade or business activity which will be covered under the insurance.
Policy limitations and endorsements, these are added to insurance policies to define the insurers responsibility under the policy for certain activities by perhaps restricting the kinds of work undertaken or else by specifying the safeguards that must be taken when carrying out certain work.
As with all insurance policies you should read the policy carefully to ensure that it meets with your requirements and you should raise any queries immediately with your insurance broker.
A business that employs people may also be subject to claims from employees for injury or damage arising out of their employment. In the United Kingdom, this class of insurance is known as Employers Liability Insurance whereas it is referred to as Workers Compensation in the US and elsewhere.
Employers liability insurance is a compulsory insurance requirement for all employers inside the United Kingdom with a few exceptions that I cover elsewhere. The minimum limit of cover for an employers liability coverage is 5,000,000 although in practice contracts are generally issued with a minimum limit of 10,000,000.
Whilst third party liability cover is not a legal necessity, it should be considered an essential must for all in business, the good news is that the insurance is broadly available over the internet at extremely competitive premiums. A specialist liability cover broker will advise you in your requirements and instant quotations and cover are available for the overwhelming majority of businesses.