In business, the liability of responsibility lies with the operator, and is known collectively as commercial liability. That means simply that you are responsible for the well-being of your customers if they choose to use or buy your products or visit your premises. You’re also responsible for the health and well-being of your employees. Liability covers everything from protecting restaurant and takeaway customers from food poisoning or even burning their mouth on a hot beverage, through to employer’s liability to protect sub-contractors on a building site, or office workers from tripping over computer cables.
Failure to protect your customers, the general public, or your employees from harm of any kind (including financial harm) could land you in hot water, and with a big legal bill to pay. To negate the financial effects of liability claims, you need to take out liability insurance. But which one? And how much cover do you need? At Business Insurance Service, we can help you answer those questions, and provide you with the right level of liability cover for you, your business, and your budget.
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What liability insurance does a business need?
Public liability cover protects you and your business from the financial impact of claims made against you or your company by individuals for personal injury or damage to property.
For example, if you’re a builder working in people’s homes then you may face a claim for compensation to replace carpets that have been damaged by workers’ muddy boots. Alternatively, a customer in a shop may suffer a slip on a wet surface and make a personal injury claim for a twisted ankle.
Public Liability claims can run into thousands or even hundreds of thousands of pounds. Without Public Liability insurance, they could obliterate a company’s profits overnight, damaging your business, your reputation, and even your own personal financial security. Typical liability policies cover:
- Personal injury claims
- Damage to property claims
- Advertising injury – this includes the financial impact of legal action brought by other parties against you or your employees such as libel, slander, and copyright infringement in adverts
- Legal costs
- Medical expenses
This is the only liability insurance that is a legal requirement if you employ anyone. Failure to have adequate employer’s liability insurance can result in criminal prosecution and a fine. This applies even if the person you employ is working on a part-time or sub-contractor basis, as well as some family members.
Some larger businesses, especially those who operate in what can be considered high-risk environments, may need a little more cover than the average liability policy can give. In these instances, additional Excess Liability cover fills in any insurance ‘gaps’ that could threaten the financial security of their business. This could be anything from a one-off policy for a large event, or wider cover for more specialist industries whose operations are not covered by standard policies.
If you think your business falls into this category, it’s important to talk to a qualified and experienced broker, who will be able to work with you to put together an Excess Liability insurance portfolio that will give you the cover you need.
This is specifically designed to help protect businesses that produce a product, and who may face a claim for compensation from a person for injury or damage that is a direct result of using that product. This could be anything from a faulty toaster to a skin cream that causes an allergic reaction.
Environmental Impairment Liability
Policies will vary widely based on the insurer, so businesses need to make sure they know exactly what their policy contains. Typical Environmental Impairment Liability policies can include:
- Own site clean-up costs
- Third-party clean-up costs
- Investigation and defence costs
- Gradual pollution for third party legal liability during policy period
- Cover for both new and pre-existing pollution incidents—each may have their own limits of liability, terms and excesses
- Bio-diversity damage or environmental damage to protected sites or sites of scientific interest
- Business interruption in the event production needs to stop or there is intervention by a regulator
The policyholder will typically have a duty of mitigation, meaning that it must take all actions to minimise the extent of the damage and prevent it from spreading. More information on Environmental Impairment Liability can be found here.
What Does Public & Products Liability Insurance cover?
A comprehensive public and product liability policy provides cover for claims of bodily injury or other physical injury, personal injury, advertising injury and property damage as a result of your products, premises, or operations. As a safeguard against liability, the policies allow you to continue your normal operations while dealing with real or fraudulent claims of negligence or wrongdoing. Liability policies also provide cover for the cost to defend and settle claims.
What are the typical Exclusions and Limitations on Public & Products Liability Insurance?
- There will typically be an excess requirement for each claim. The excesses will vary depending on the policy and covers sought.
- Injury to your own employees or to your own property is not covered under Public/Products liability insurance. Make sure you have Employers’ Liability insurance and adequate Property insurance.
- War, terrorism or nuclear risks are typically not covered.
What is an example of an Public Liability Insurance Claim?
There are many different types of public liability claims that could be brought against your organisation. One reason that this cover is so important is the wide variety of circumstances that can lead to an allegation.
Public liability insurance covers a wide variety of incidents when harm befalls someone else, but it should be noted that a policy does not provide protection or aid for damage to an organisation’s own property. Similarly, it will not cover costs related to a claim made by an employee.
Still, with potential costly claims coming from so many different directions and stemming from such a wide variety of situations, your organisation should strongly consider acquiring public liability cover. Without this cover, it is possible that even a small mishap could result in devastating financial loss.
Some of the common situations that could result in a claim, and severe financial loss, include:
Contributing to personal injury
If somebody suffers an injury or illness and blames your organisation, a public liability claim may be made. If a customer slips and falls due to a wet floor, or trips over an obstacle left in a walkway, your organisation could be found liable for the resulting medical expenses. You also may have to provide additional compensation if the injured party was forced to miss work as a result.
Damaging a client’s property
Employees are often called upon to perform work on the property of customers and clients, but these tasks come with risk. For example, if a luxury car has its paint scratched while being cleaned, or an electrician fails to rewire a fuse box properly, the resulting damage could lead to a claim.
Causing third-party damage
In the event that an issue results in injury or property damage to someone who was not directly involved in the situation, a public liability claim may be made. One scenario that might lead to this type of claim could be a plumber’s work resulting in water damage not only to their client, but also a neighbour.
What is an example of an Employers’ Liability Insurance Claim?
Employers can be held liable for many different types of accidents or issues. In addition to the physical and emotional harm that an incident can cause for an employee and their colleagues, an employers’ liability claim can also result in devastating financial and reputational damage.
Following an accident, it is important that organisations be able to maintain normal operations while also managing the aftermath. However, government fines, restitution resulting from a claim and the cost of legal representation can all present financial challenges.
Slips, trips and falls
These accidents can take place in many different settings across a variety of sectors. If an employee trips over clutter or slips on a wet surface, it is possible that their resulting injuries could lead to an employers’ liability claim.
Manual handling injuries
Moving and lifting heavy objects can lead to both injuries and long-term health problems, such as back pain. If employers do not take appropriate precautions, such as carrying out risk assessments, minimising manual handling tasks, and providing proper equipment and training, a claim may arise.
How much liability insurance do I need for my business?
The usual levels of liability cover usually range from £1-2million up to £10million and beyond. For most sole traders and SMEs, liability cover of up to £5million should be sufficient, although larger companies may want to take out a higher level of cover. The level of indemnity represents the maximum amount of compensation an insurer will offer you if a claim is made against you. So it’s important to make sure you’re not under-insured.
Demonstrating that you take your liability commitments seriously by having the right level of cover also sends a message to your customers that you take their needs seriously, and that your business is determined to remain financially stable, even in the event of a serious claim.
Public liability insurance considerations
- The value of your premises as well as others’ premises where your organisation may work, as more expensive properties will generally require higher indemnity levels.
- The number of people located in the vicinity of your work-site, as well as those who face the risk of harm on your organisation’s premises, such as customers or members of public. For instance, a business that sees a large amount of customers on their property should consider higher indemnity levels.
- The requirements made by a contract your organisation agreed to with a client or business partner, as well as any laws or regulations.
- The nature and proximity of the area surrounding your organisation’s property.
- Whether or not the nature of your organisation’s activities or services have the potential to cause harm.
- Whether or not your organisation has any risk management programmes in place to protect against potential public liabilities.
Products liability insurance considerations
- Whether or not your products face North American exposures, as this region is likely to produce more (and greater) claims.
- Who designs your products, provides your raw materials, manufactures your products and transports them, as your partner organisations may have a history of liability concerns or lack proper risk management.
- Whether or not your organisation has proper risk management systems in place, as well as a rigorous programme that tests and checks products for potential faults or damage.
- Whether or not your policy is sufficient to cover a worst-case scenario compensation claim should your product cause injury or property damage.
- Whether or not any contracts you have specify that you must possess a minimum level of cover.
In addition, it is important for your organisation to consider that products liability insurance typically establishes an aggregate limit for an entire period of cover, whereas public liability insurance generates an indemnity level for ‘any one occurrence’. For products liability, this means that if a faulty product affects multiple people and leads to a series of claims, the insurer would pay all claims for that period of cover up to the limit, typically between £1 and £5 million.
This contrasts with public liability cover paying out on an ‘any one occurrence’ basis, meaning the insurer would pay up to the limit (at least £2 million) for all claims related to a single occurrence. If another incident occurred during the same period of insurance, the public policy would still pay up to the limit for the second occurrence.
Lastly, be sure to take note of any exclusions or conditions the insurer includes within the policy. Potential exclusions could include liability claims for products exported to certain countries, while possible conditions could include that your organisation keeps appropriate documentation on risk management.
How we can help – Business Insurance Service, your liability insurance brokers
At Business Insurance Service, we understand how business works. We know that your financial security is paramount to you, and how public liability insurance can give you the protection you need.
We work with some of the largest and most respected insurance providers in the UK, and For larger policies with more complex insurance portfolios, we can also call upon our partners at Lloyds of London to deliver corporate insurance services to our larger customers. All of our brokers are fully qualified and regulated.