BUSINESS LIABILITY INSURANCE MADE SIMPLE

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1 BUSINESS LIABILITY INSURANCE MADE SIMPLE Working with the profession to simplify the language of insurance

2 DON T LET YOUR BUSINESS BECOME A LIABILITY If your business is responsible for injuring someone, or for damaging their property, it is 'legally liable' to pay compensation. Mostly this happens if you, or people who work for you, are negligent i.e. they ve failed to take reasonable care, and this has caused injury or damage. Perhaps you didn t provide protective equipment to an employee, or failed to maintain your premises properly. Good reasons to have liability insurance If you have business liability insurance and someone does claim, your insurer will negotiate compensation on your behalf. If your insurer believes the injury or damage was not you or your business s fault, they will often cover the costs of taking legal advice and defending an action in court if necessary. This is an important aspect of the cover, as legal costs can be substantial. Did you know? In 2015, liability insurers paid out 8.9 million in claims. Of this, 2.9 million was paid to employees injured at work.

3 Types of business liability insurance There are several kinds of business liability insurance, including: Employers' liability Public liability Products liability Professional indemnity insurance Directors' and officers' insurance. Employers Liability Public Liability Do I need business liability insurance, by law? As an employer, yes to cover the cost of compensating employees who are injured or become ill through work. Some parts of business liability insurance are optional, unless someone you are working for specifies in your contract that you must have your own business liability cover. If so, they will probably ask you to confirm what cover you have in writing. Products Liability Professional Indemnity Directors and Officers Insurance Types of business cover

4 What is employers liability insurance? If your company is responsible for an employee s injury at work or for illness caused by the work they do for you they can seek compensation, including any legal fees they incur by claiming. For example, if an employee injures their hand using a piece of unguarded machinery. Employers liability insurance protects against the costs of settling such claims. Insurance certificate Most businesses are legally required to have employers liability insurance. The only exceptions may be if you ve no employees, or are a family business where all employees are closely related to you. If you re not sure, you can get advice from the Health and Safety Executive website: hse.gov.uk/simple-health-safety/get.htm Did you know? You can be fined up to 2,500 for each day your business doesn t have employers liability insurance. And you must display your insurance certificate where your employees can see it online or on the wall, or both, or you may be fined up to 1,000. Note: Employers liability insurance doesn t cover damage to employees property. This comes under your public liability policy. You must display your insurance certificate where it can be seen

5 What is public liability insurance? This covers the cost of compensation to third-parties for death, injury or damage to their property as a result of your business activities where you are at fault. To clarify, a third-party is anyone your business has contact with other than its employees, including people visiting your premises, and even passers-by. For example, if a visitor to your premises slips on a wet floor and breaks an arm or if an employee is working in a public place and a third-party trips over equipment they ve left lying around. Public liability insurance can provide valuable protection against the cost of claims relating to events like this. It s not usually compulsory, except for businesses affected by specific legislation, such as riding schools. But without it, your business could end up in extreme financial difficulty if someone claims. Injury at work? You could be liable to pay compensation

6 What is products liability insurance? This covers compensation paid to anyone injured, or whose property is damaged, because of a fault in a product you design, manufacture or supply. For example, an electrical fault that causes shock or fire, or a loose component. Product liability insurance only covers compensation and associated legal costs it doesn t include the cost of replacing the defective product. Did you know? You can be held liable for faulty products, even if you didn t manufacture them for example, if your business name is on the product, or if you imported the product from outside the EU or if you can t identify the product s manufacturer, or they ve gone out of business. Products liability policies don t cover contractual liability. If your business signs a contract that makes you responsible for injury or damage you wouldn t otherwise be responsible for, you need to talk to your insurance provider about adjusting your level of cover accordingly. Other types of liability insurance Professional indemnity insurance protects professional people against claims their clients make for injury or loss that arise from failure to carry out professional duties in a proper manner. For example, an investment consultant may give incorrect advice, causing a client s financial loss. Professionals such as solicitors, accountants, financial advisors, architects or surveyors need this cover, and are often required by their industry regulator to have it. Directors and officers insurance is a more recent type of liability cover, and reflects a growing trend of claims against individual directors and senior managers of a company for example, by shareholders, investors, employees or regulators. It provides protection where a director or officer has failed to carry out the specific duties, responsibilities and powers relating to their position with the expected level of care and skill. Here s a real-life example. A director signs a cheque that doesn t include the word 'limited', and the cheque bounces. By the time the corrected cheque is presented, the company has gone into liquidation. The Managing Director is held personally responsible for the cheque s value in this case, over 30,000.* *Source: perkins-slade.com/for-your-business/d-o-insurance/d-o-claims-examples

7 How do I buy business liability insurance? You can buy directly from an insurer, or through an intermediary such as a broker. Most insurers offer employers', public liability and products liability cover. Professional indemnity, and directors and officers insurance, are more specialist, so you may have to look further for these. You can buy each of these types of cover separately, but many insurers offer employers, public and products liability insurances in one policy, which may save you money. How much does it cost? Premiums for business liability insurance depend on many factors, including the type of business, its turnover, number of employees, and any related claims history. You may need to provide more detailed information for specialist professional indemnity or directors and officers insurance. Things to be aware of: By law, your employers liability insurance must provide cover of at least 5 million, but most policies give you 10 million. For other types, you normally choose how much cover is appropriate, but it s important to base it on the worst potential loss, as your insurer will only pay up to this limit in the event of a claim. Some policies particularly those designed for small businesses contain automatic limits, but you may be able to increase these by paying an additional premium. Like all insurance policies, liability policies contain a number of exclusions so check your policy document carefully. When you compare business liability insurance policies, remember that cheapest isn t always best.

8 Remember if you have any questions about business liability insurance, just ask me, Ciindy /AskCiindy