Understanding Public Liability Insurance – How much is enough?

Summary The purpose of this article is to help commercial insurance buyers to understand what Public and Products Liability insurance is, why it is an essential purchase and why the levels of cover needed to be bought are rising. Anthony Jones Insurance Brokers are committed to best advice to customers. This is a brief summary of the key issues and is not intended to be a definitive work. There are many different types of public liability policies available and many conditions, exclusions and warranties applied. We have extensive knowledge and experience in the market that enables us to assess what is most suitable for your business. Should you require further information or clarification please contact us. https://anthonyjones.com/ What is Public Liability Insurance? This is cover that offers financial protection against claims made against you for injury or damage where you are found to be legally liable. Members of the public or your customers or contractors are often referred to as “third parties” and it is these groups who if suffering an injury or damage can claim against you for negligence or an error or omission. You should think about the scale and scope of what your business does.  Do members of the public or customers visit your premises? Do you visit or work at other premises or in public places? Think about something simple such as the value of even domestic properties especially in London and the costs of damage or even total loss.  Who are your customers? Are you regularly dealing with larger customers who would be well versed in understanding where monies can be recovered? What could go wrong and how much will it cost to put right? It might be no surprise that containing legal costs and personal injury costs is a never ending story despite the Governments best intentions and interventions on “compensation culture”. Claims inflation continues to pose insurers problems particularly serious personal injury and the costs associated with long term care. Public Liability insurance is not mandatory. You do not have to buy it but there are significant business and financial risks in not doing so. Some customers require proof of Public Liability insurance when looking at suppliers or contractors. In particular, government or local authority contracts usually ask for suppliers to have between £5 million and £10 million of public liability insurance. This may be moderated if you are able to show a suitable risk assessment but often there is no choice. If you work airside you would probably be asked for £35m. Some trade associations and regulatory bodies insist on minimum levels of cover. Products Liability Insurance is also not mandatory but someone injured or hurt through using a faulty product can have extensive legal liability issues even if you are not directly the manufacturer. Be wary if you repair or alter products or import products especially if you are unsure of the precise domain of where they come from. How much is enough insurance – what Limit of Indemnity do I need? Let’s consider the basics of what costs would be met by insurance in the event of you being considered legally liable:

• Compensation to injured third parties
• Repairing or reinstating damage
• Legal Fees in defending a claim
• Expenses
• Hospital costs such as ambulance costs and NHS charges

Ultimately, it is up to you to decide how much public liability insurance you need .The amount of you need depends on the work you do and whether your clients expect a certain level of cover. Most insurers offer between £1 million and £10 million, and when you’re choosing a cover level you should think about the possible size of compensation demands. Anthony Jones Insurance Brokers advice is very simple – buy as much as you can afford. Every business is different but budgeting for insurance is always going to be easier and cheaper than budgeting for an issue that you may or may not anticipate. Our view is that you should regard cover as something to help you sleep at night, therefore why try and think what limit you might need when you can get a higher limit for comparatively little extra.  Prices to uplift your levels of indemnity are very cheap at the moment and are a good buy. If you are buying £1m worth of cover it won’t follow that your premium will double to buy £2m. Remember insurers are mainly exposed at £1m so the cost to uplift is modest . Our best advice is that any buyer should carry a minimum of £2m indemnity. Anticipate is a key word. Even carrying out some of the thinking referred to in this you can never always predict in advance how much a claim will cost. You may have read the news articleabout a woman who sued a pub for £4.2m after tripping on a beer garden rope. Who would have thought this was possible? What then of the company who made big flower vases out of ceramics. Came as a surprise that they were on receiving end of a claim in excess of £2m when a vase leaked on a piano that had been used by some famous composers. On a more day in day out situation, a fire in a block of flats was caused by a washer-dryer in a downstairs tenanted flat.  The initial reserve by adjusters for the buildings and contents element was £385k.  However, during the repair works extensive asbestos was discovered throughout the property.  Current Building Regulations require stringent approaches taken to asbestos and it led to a significant increase in the reserve to over £1,000,000 and over the indemnity limit. A final example was a window replacement company, while fitting windows to a ground floor flat, caused minor damage to the flat above.  However, the owner of the flat above suffered from mental health issues and refused access for repair and complained about the repairs that were eventually carried out.  As a result the insurance company bought the ground floor flat and gave it to the owner of the first floor flat – thus he ended up with the whole house.