What a very confusing subject !. There seems to be a whole range of products labelled public liability insurance, employers liability insurance and a fair few other varieties of liability insurance. There is considerably more uncertainty concerning what precisely is optional and what the law demands. This article is intended to simplify liability insurance in order that we can all purchase a product to fit our needs and protect our business against litigation from members of staff, clients or the general public. Let’s start by talking about the more common types of liability insurance.
Employers Liability Insurance
An employer is responsible for the health and safety of their employees while they are working. Your staff may be harmed whilst working or they, or your former employees, may develop an illness as a result of their endevours whilst working for you. They could try to claim compensation from you if they believe that you are responsible. The Employers’ Liability (Compulsory Insurance) Act 1969 insists that you have a certain level of insurance protection against claims by employees past or present.
Employers’ liability insurance will enable you to pay any compensation that is awarded to injuries or illness to your employee’s whether they happen off or on site. Incidentally, any injury or illness as a result of motor accidents that occur while your employees are on company business could be already covered by your car insurance.
The National Health Service are likely to claim hospital treatment costs and ambulance costs whenever compensation for personal injury has been claimed.
Members of staff injured because of the negligence of an employer can seek damages even if the business should go into receivership or liquidation.
According to UK law, employers in the UK must take out ELCI (Employers Liability Insurance) and have cover of at least £5 million. Most insurers offer a minimum of £10 million cover. ELCI must provide cover for all of your employees in the United Kingdom.
If your business is not a limited company, and you are the only member of staff or your staff consists solely of close family members, you need not purchase ELCI. Limited companies with a single employee, provided that the employee owns at least 50% or more of the shares in the company, are also exempt from compulsory Employers Liability Insurance.
Public Liability Insurance
Public Liability Insurance covers any awards of damages given to a member of the public because of an injury or damage to their property that can be blamed on you, your business or your staff. It also offers cover against any related legal costs and expenses together with hospital treatment costs (together with any associated ambulance costs) that the NHS might attempt to claim from you.
Premiums vary according to the type of business you run, turnover of the business and the number of employees you have.
Some professions, for example horse riding schools, are legally forced to have public liability cover. It is also likely that some of your customers or potential customers require proof of you holding public liability insurance before they will do business with you.
Product Liability Insurance
In product liability insurance (PLI) terms, a product is any physical item that is given away or sold.
According to the Consumer Protection Act of 1987, products have to be “fit for purpose”, claimants may attempt to claim from you initially, even if you did not manufacture it. You would be open to compensation claims if:
- your business’ name is on the product – ie the manufacturer made it for your brand
- your business repairs, refurbishes or changes it
- you imported it from outside the European Union
- you cannot clearly identify the manufacturer
- the manufacturer has gone out of business
If none of the above applies, liability lies with the manufacturer – or the processor where the product involves parts from multiple manufacturers.
Property Owners Liability Insurance
Property owners’ liability insurance enables you to meet any damages and costs awarded to a member of the public if they suffer an injury as the result of an accident on, or linked to, your premises. This might include costs of treatment in hospital and ambulance charges claimed by the NHS, if somebody is awarded compensation for personal injury.
In general, it’s a sensible idea to make sure that property owners’ liability is included in your business insurance – you might find it included within contents insurance.
Professional Indemnity Insurance
If your business involves selling your skills or knowledge, you might want to consider purchasing professional indemnity insurance.
The product covers your company against claims for compensation brought by a client if you have made errors or are found to have been negligent in some or all of the services that were provided to them. Professional indemnity insurance will also cover any legal costs.
Most advisers have professional indemnity insurance in place. If you are an accountant, lawyer or financial adviser, then you are required by law to carry professional indemnity insurance. Professionals such as architects, consultants, advertising and PR agencies, and designers often opt for such cover as well.
Business Insurance
Many self-employed tradesmen or owners of small businesses will find that there are liability insurance products that are designed specifically for their particular trade. These products are marketed under a number of labels such as business insurance, small business insurance, tradesmans insurance or self employed liability insurance. These offerings will normally incorporate a variety of individual sections including employers and public liability, combined with appropriate sections of office insurance, professional indemnity and legal expenses. A business insurance policy should offer substantial savings when compared to buying the individual components separately.
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