information and advice - public and product liability insurance

Can you afford to be without it?

All businesses are exposed to some degree of risk. The sudden loss of a key member of staff, for example, could have disastrous consequences as could damage caused by a fire, long term failure of equipment or loss of property through burglary.

If your delivery van is put out of use following an accident or your premises get flooded, imagine how disruptive this would be to the day to day running of your business. And what if one of your customers is injured because a product you sold was not wired properly or a member of staff is hurt in a workplace accident?

This is where insurance comes in. All these eventualities can be insured against and the impact they have on the long term success of your business minimised. They are optional, of course, and businesses have to assess the risks – their likelihood to occur and the damage they could cause – and decide whether insurance is required.

There are, however, 3 types of business insurance which are essential.

1. Employers liability insurance
All businesses, no matter how small, have a legal obligation to take out this type of insurance which provides protection should a member of staff bring a legal case against the firm, for an accident caused in the workplace, for example. It covers against injury, illness or disease sustained in the course of a past or present worker’s employment.

2. Public liability insurance
The second main type of insurance that a business needs is public liability insurance. This is not a legal requirement for all businesses but is mandatory for ones which offer a product or service to consumers. Public liability covers the business against injury, illness, death or disease contracted by anyone, other than an employee, as a result of your business operation.

The cost of public liability insurance varies according to the amount of cover required and this normally ranges between £1m and £10m a year. The level of cover required tends to follow specialist trades and activities and also covers damage to or loss of property as well as legal fees.

Amounts awarded by the courts can be huge and claims multiple and this is why taking this cover is crucial.

3. Product liability insurance
This type of insurance covers legal liability to pay damages when a defective product causes damage or injury or financial hardship. And it’s not only the manufacturer that needs to take out product liability insurance, any business that supplies products to another firm or to the public should be covered.

If you manufacture, fix or sell goods and they injure anyone or damage anything as a result of a defect, a court may decide that your business is liable, even in cases where you are not negligent.

Liability for faulty goods normally lies with the manufacturer but, if it is no longer trading, responsibility can fall to the supplier. Like public liability, the courts can award large compensation orders and to more than one claimant at a time, so getting enough cover is essential.

For businesses that deal in services, professional indemnity cover will be more suitable. This will cover any action brought about by clients that have incurred a financial loss as a result of bad or negligent advice or services they may have received.

Most professional bodies have professional indemnity cover and in some cases this is compulsory.