Types of liability insurance:
1. Employer’s liability – The Employer’s Liability (Compulsory) Act 1969 requires all employers carrying on business in Great Britain to insure against their legal liability for injury or disease caused to their employees in the course of their work for them. So, for the liabilities that employers may incur in respect of their employees, cover is usually arranged under the employer’s liability insurance section of a package or combined policy.
2. Public liability – Public liability insurance protects the insured in respect of legal liability to third parties for both bodily injury and for any loss of or damage to material property that the insured may be held responsible for. Members of the public may suffer injury or damage to their property due to the activities of someone else, and public liability insurance has been designed to provide compensation for those who may have to pay damages and legal costs for such injuries or for the damages to property.
3. Products liability – Product liability insurance provides coverage to the insured’s legal liability for bodily injury to third parties or loss of or damage to material property caused by products or goods, a cover which is usually excluded from public liability insurances. Products liability insurance is frequently combined with public liability insurance to avoid any potential gaps in insurance cover. All types of businesses involved in the supply of goods, products or services are likely to be in need of product liability cove e.g. manufacturing, retailing, wholesaling, installation, maintenance, repair or servicing.
4. Professional indemnity – Professional people (accountants, solicitors, architects, doctors, surgeons etc) can insure their special liabilities on a professional indemnity insurance to cover the consequences of, for example, giving faulty advice or treatment.
5. Directors’ and officers’ liability – The senior officers of companies have statutory duties and the consequences of failing to comply with these duties can be insured by directors’ and officers’ liability insurance.
6. Libel and slender – Newspapers and similar publications can protect against the results of their words by having a libel and slender insurance.
7. Environmental liability – The cleaning up of pollution and contamination under the requirements of the Environment Act 1995 can be insured against by environmental liability insurance.
8. Retrospective cover – To resolve the difficulty of untraced policies, or policies with may have had restrictive endorsements, some insurers are prepared to issue a retrospective policy or one with retrospective cover.
9. Legal costs and expenses – There are areas of business life in which a person or company may be faced with legal expenses unconnected with any liability policy. Some or all of these legal expenses can be insured separately on a legal costs and expenses insurance.
10. Financial loss – Circumstances may arise where a claim made against the insured is not dependent upon injury to third parties or damage to property, but is purely for financial or economic loss. Financial loss cover is for the insured’s legal liability for damages and costs and expenses incurred in respect of a financial loss.
11. Products guarantee – This insurance deals with the exclusion, under products liability cover, of the cost of repairing or replacing the defective product. The aim is to protect the insured against their legal liability arising out of the failure of their products to fulfill their intended function.
In relation to employer’s liability, the factors that would be taken in assessing and rating the risk are:-
- the type of business;
- the categories of employees showing separately, for example:
- – clerical,
- – managerial employees not engaged in manual work,
- – manual work,
- – manual work using power driven machinery,
- – labour only sub-contractors,
- – principals and partners,
- – and all other employees;
- the number of employees and annual wage roll for each category
- specific details of work carried out away from the insured’s premises and any work carried out outside the UK;
- use or past use of hazardous materials, e.g. acids, chemicals, gases, asbestos or explosives;
- guarding and maintenance of machinery and plant;
- any work undertaken at height or below ground;
- any high risk activities e.g. steeplejacks, stuntmen etc.
- compliance with statutory requirements for health and safety and other applicable legislation.
2. The steps taken in doing liability surveys are as follows:-
- Visiting the Insured’s premises;
- Evaluating and estimating the likely frequency and severity of the liability risks taking into account the employers, public and products liability exposures;
- Verifying the information provided on the proposal regarding business activities, working practices, health and safety, quality control etc.
The considerations that would be taken by the surveyor in doing liability are:-
- health and safety policy and attitude;
- risk assessments carried out for manual handling, safe systems of working, display screen equipment etc;
- training and supervision of staff;
- machinery and plant condition, maintenance, safety guards and protections;
- transportation on the premises;
- provision and use of personal protective equipment;
- occupational health and welfare assessment, e.g. noise levels, first-aid provision;
- public access and controls;
- use and control of contractors;
- pollution risk;
- work away from the insured’s own premises – activities and locations;
- product risk exposure, quality assurance and export details.
(a) Retrospective cover:
To resolve the difficulty of untraced policies, or policies which may have had restrictive endorsement, some insurers are now prepared to issue a retroactive policy or one with retrospective cover. These are issued on the “claim made” basis. This means that the insurers are liable for claims made during the year of insurance even if the events have occurred in the past.
The retroactive policy will exclude any risk for which a more specific insurances was in force, and also where an indemnity under a previous policy was not available because of a breach of policy conditions, non-disclosure or misrepresentation.
(b) Directors and officers liability:
Over the last ten years or so company directors and their senior employees have been found to be personally responsible for their negligence in the running of their company. Legislation has also made company directors liable for the behaviour of the company so that shareholders, creditors, customers, employees and others can now sue the directors as individuals.
The policy provide an indemnity to the company in respect of the costs it incurs in indemnifying a director against the successful defence of a claim and an indemnity to the director in circumstances where this cannot be obtained from the company because the defence has not been successful.
Liability may arise out of lack of care and skill in the performance of the duties; for example, negligent advice or mis-statement, particularly in the context of a merger or takeover when failure to understand economic trends results in a poor forecast of the company’s performance. Any act which goes beyond the company’s constitution such as excessive borrowing, unauthorised payments, failure to disclose the full extent of the directors’ interests or a failure to comply with requirements may involve a director or office in a personal liability. Failure to arrange proper insurance may also attract liability.
Directors’ and officers’ liability policies exclude:
- claims for bodily injury or damage;
- actions brought against an individual director as a result of their own dishonesty, fraudulent or malicious conduct;
- claims arising from improper personal gain, profit or advantage;
- breaches of professional duty.
(c) Environmental liability:
The standard liability cover excludes pollution and contamination unless caused by a sudden identifiable, unintended unexpected incident that takes place in its entirety at a specific time and place during the period of insurance.
Section 57 of the Environment Act 1995 imposed statutory duties on local authorities to inspect its area to identify contaminated land and decide if land is to be designated a special site. It also promoted the principle that the polluter pays for the clean up costs.
Liability for cleaning up land designated “ a special site” rests with the appropriate person who may be the original polluter, the party knowingly permitting the polluting or the innocent buyer or occupier.
The liability is retroactive so it requires the clean up of historic pollution. There is no cut off date. Those likely to be at risk are:
- property owners or prospective property owners;
- agricultural land owners;
- motor traders;
- financial institutions (lending money for the purchase of land or property)
- factories and businesses involved in the production or supply of chemicals.
This liability cover is very specialised and available only from a few insurers. Before contemplating the provision of such covers very rigorous checks and detailed surveys will be undertaken of the land and/or property in question. Even if an insurer is prepared to provide such cover it can be extremely expensive when compared to normal liability insurance cover.
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