Business Insurance – Liability Cover

June 9th, 2010 | Author:

What is Public Liability Insurance?

Public liability insurance is cover to protect you or your business in case you damage someone’s property or hurt someone through any negligent actions of your business. This is described in policy wordings as 3rd party property damage and 3rd party injury.

For example: You are repairing someone’s roof and you drop one of your tools. It slides down off the roof and falls on a passerby walking past, and hurts them. This is 3rd party injury.

A 3rd party is a person from outside the business. This is generally your client or a member of the general public.

So liability insurance will cover my business if property is damaged or people are hurt? Yes and no, there are several caveats to this. Although liability insurance provides cover for negligent actions, there are a couple of common endorsements you need to be aware of.

Firstly, it is assumed you are competent at your trade, and as a result, cover will not extend to any item you are working on, or to any defective workmanship. This helps keep policy premiums down to manageable levels, but what does this actually mean? Imagine you are a cleaner working in someone else’s house. If you are cleaning a posh vase, but knock a picture onto the floor while doing this, then a claim could be made for the damage to the picture. However, if you damage the vase itself, no cover would apply, because that is the item being worked on at the time. For certain trades a policy will also specify conditions that have to be worked to, in order for any claim to be met. For instance: trades such as plumbers or heating engineers, who may use blow torches or other heat producing tools as part of their business, may have to work to conditions that specify certain fire precautions, for obvious reasons. Provided these are kept to, a claim is less likely to happen, and more likely to be paid if it does occur.

Secondly, it only covers actions that are negligent. However, genuine accidents can still happen where no fault can be attached to any person. If the policyholder had previously taken all reasonable and foreseeable precautions before an accident occured, then there may be no evidence of any negligent activity and a claim would not be paid. This does not mean the policyholder would be left high and dry, but that the insurance company would defend any legal action on behalf of the insured.

However, having a liability insurance policy that protects you against negligence, is not a licence to go daft. As mentioned in the previous paragraph, a policyholder might not be held negligent for an incident if they had taken “all reasonable and foreseeable precautions”, and the majority of liability policies will have this phrase, or something similar incorporated into their wording. After all, any insurance policy is never a “catch all” device, and shouldn’t be treated as such. Regardless of this, insurance cover for liability still represents very good value, especially when you take into account how much litigation occurs in today’s society, and the large sums negligence claims can rise to.

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