They say that you can never have too much of a good thing and a strange as that sounds it probably also applies to a businesses liability insurance.
We are often asked “How Much Public Liability Insurance Do I Need?” and that is not an easy question to answer.
It depends directly on the maximum amount which you could ever be liable for should you be unfortunate enough to suffer a loss.
As we don’t have a crystal ball, the exact level of a future claim is impossible to predict, but what we can do is examine some of the key factors which influence claims exposure.
Remind me, what exactly is Public Liability cover?
PL Insurance provides protection against your legal liability for claims made by clients or members of the public for injury or damage to property as a result of the actions of you (or one of your employees) while carrying out your business activities. Typically, this will form one of three areas:
- Injury – For example, you drop a hammer from a ladder, and it hits a passer-by, or someone trips over your laptop case or drill box and breaks an ankle.
- Property Damage – One of your employees drills through a pipe or starts a fire while welding a pipe.
- Anxiety or Stress – while stress claims are becoming more common under Employers Liability, they are also growing in volume under Public Liability as the actions of a business impact on the wider public. For example, a member of the public witnesses a fatal injury at a site, resulting in emotional stress and anxiety, which impacts their ability to work.
Where You Work
The type of location, sites or company premises which you work at will significantly impact your exposure to a significant loss.
If you are an electrician working at Wembley Stadium on Cup Final day, this is obviously a much more substantial risk to large claim than if you are working at a domestic home.
Think about both the maximum property damage claim and the number of people who could be injured should the worst happen.
The Nature of your Work and The People you come into contact with
Another key area of consideration is the type of contract or work you are carrying out.
To take the example above, if you are working as an Accountant and are contracted by the FA to work at Wembley Stadium, the Liability risk is clearly not as significant as a Tradesman who is carrying out maintenance or repairs.
However, you will also need to think about the people you are coming into contact with, if you are dealing with customers or at venues where people may have significant income levels, then this should also be factored into your decision.
Just think, if David Beckham tripped over your Laptop bag and broke his leg, his loss of earnings claim could be substantial.
In the same way that you are now reviewing exposure and risk, firms will very often have followed a similar path.
They may impose a standard liability requirement for any contractor who works at one of their premises.
This will often mirror their own level of liability insurance cover, and they are likely to require confirmation of cover before any work takes place or at the point of tender.
Typical PL Limits
The standard limit purchased for Public Liability is usually between £2,000,000 and £5,000,000.
However, this doesn’t mean this is adequate for your own requirements, but can obviously be used as a starting point for your decision-making process.
How is a settlement of Liability Injury Claim Awards Calculated?
When you are dealing with property insurance losses the process is much simpler; e.g. £50,000 worth of damage has been caused plus any associated costs and expenses.
However, injury claims can be much more complex, and will settlement will be tailored to the specific nature of the individual circumstances.
Typically the following circumstances would be considered:
- The type and nature of the injury
- Loss of earnings
- Medical costs (including long-term care if applicable)
- Family circumstances and Dependents
- Legal Costs and expenses
The Association of British Insurers (ABI) reported that £7m a day was paid out in liability claims during the course of 2012, of which £4.3m was Public Liability related.
This may seem staggering, but consider the worst-case scenario whereby some is seriously injured, they cannot work again and require specialist long-term care.
Such claims can quickly run into six or seven-figure settlements.
What happens if I exceed my Limit of Indemnity?
Should you suffer a significant loss over your insured limit, the claimant is likely to pursue your personal assets (in the case of a Sole Trader or Partnership) or Business assets (Limited Company) as they seek full settlement of the balance of the claim.
Obviously, this could be very serious and put your home or business existence at risk, which is why it is always advisable to consider your liability limits very carefully at the outset for complete peace of mind.
FREE Business Insurance Review
Insync Insurance is a specialist Business Insurance Broker.
Why not book a FREE review of your current insurance programme to ensure that you have considered all potential exposures and policy limits.
You can book a review online at a time that suits YOUR diary, alternatively call 0330 1240730 for more information, we would love to hear from you!