Every business owner should consider the adequacy of their limits of indemnity and consider if they will be sufficient in a worst-case scenario situation. Court awards have been increasing and litigation can be a very expensive and lengthy process. When buying cover It`s important to consider issues such as accumulation risks – how many employees / customers could there be on your premises at one time as that means you could face multiple claims from one incident.
As well as personal injury claims you need to consider the potential for claims for third party property damage caused by your negligence. For example firms who undertake work involving hot processes at other people`s property do present a higher risk of causing substantial property damage. You need to consider your potential exposure should your employees cause a fire which destroys the property. You may be held legally liable for the damage caused plus consequential losses & expenses which could create a very substantial bill – there have been some large losses of this type in recent times.
Some insurers are limited in how much cover they can provide, so it’s normal to purchase additional cover from other insurers. These covers are commonly known as excess layers and this is normally a very cost effective way of topping up the cover provided by your primary policy. For example, you are contractually required to have Public Liability cover of £10m, but your insurer can only provide £5m. In that instance you can purchase an additional £5m cover to make up the shortfall. As the excess layer insurer will only pay when the primary policy has been exhausted the costs of the additional layers are normally much less than the primary cover.
Ideally, the terms and conditions of the excess layer would mirror the primary policy, however, it is prudent to check as they may differ and contain additional exclusions / conditions. Review these with your broker to ensure you have the right cover in place.
Many businesses in the construction sector are taking much higher limits of indemnity because of contractual obligations – their customers are setting the bar ever higher and the contractor must buy substantial limits even to be considered for a tender. We are seeing contractual requirements for cover of £25m / £50m regularly on large projects as the advisors on these projects are insisting on high levels of protection.
Also, it’s not just contractors that require additional cover. Professionals providing advice and design services such as accountants, architects etc, may also require to have excess professional indemnity which gives additional protection in the event of an insured loss. We live in a litigious society and its best to have enough insurance in place for piece of mind.
It is also possible to buy excess layers for Employers Liability which is very relevant where large numbers of staff work in one location. This cover used to be unlimited until after the Piper Alpha oil rig disaster in 1998, when insurers sought to cap their limits on standard policies and £10m is the normal limit provided by insurers.
ABL are happy to discuss all aspects of your liability insurance requirements and provide advice and costed options for you to consider. Please contact myself and I would be delighted to assist you.
Lesley-Ann Starrett BA Hons PG Dip Bus Admin (Open) FCII
Chartered Insurance Broker
T: 028 9099 3710