What a very confusing subject !. There seems to be a whole range of products called employers liability insurance, public liability insurance and quite a few other varieties of liability insurance. There’s even more confusion concerning what precisely is optional and what the law demands. This article is intended to simplify liability insurance in order that we are all able to select a suitable product to protect our business against claims from the general public, clients or members of staff. We’ll start by describing some of the types of liability insurance.
Employers Liability Insurance
Employers are responsible for the health and safety of their employees while they are at work. Your employees may be injured whilst working or they, or your former employees, may become ill as a result of their endevours whilst in your employment. They might try to sue you for damages if they think that you have been negligent in your duty to protect their health and safety. The Employers’ Liability (Compulsory Insurance) Act 1969 dictates that you have at least a minimum level of liability insurance cover against any such claims.
Employers’ liability insurance will enable you to pay any compensation that is awarded to your staff illness or injuries whether they are caused off or on site. However, any injuries and illness relating to motor accidents that happen while your staff are working for you might be already covered by your motor policy.
The NHS can also claim hospital treatment costs and ambulance costs whenever compensation for personal injury is paid.
Members of staff injured because of an employer’s negligence can seek damages even if the business goes into liquidation or receivership.
According to UK law, employers in the United Kingdom must have ELCI (Employers Liability Insurance) and be insured for at least £5 million. Most insurers offer a minimum of £10 million cover. ELCI must provide cover for all your members of staff in the UK.
If your business is not a limited company, and you are the sole employee or you only employ close family members, you do not need compulsory ELCI. Limited companies with only one employee, provided that the employee owns at least 50 per cent or more of the issued share capital in the company, are also exempt from compulsory ELCI.
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 caused by you, your staff or your business. Furthermore it covers any related legal costs and expenses together with costs of hospital treatment (including ambulance costs) that the National Health Service may try to claim from you.
Premiums depend on your style of business, your turnover and how many members of staff you employ.
Certain professions, eg horse riding establishments, are legally forced to hold public liability insurance. You are also likely to discover that a proportion of your potential or actual customers need 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.
Products must be “fit for purpose” under the Consumer Protection Act 1987. It is your legal responsibility to make recompense for any damage or injury that a product you supply might cause.
(If the product that you supply is faulty, claimants may attempt to claim from you first, even if you did not actually make it. You’ll be open to compensation claims if:
- your company name is on the product – it was manufactured for your brand
- your business fixes, upgrades or changes it
- the product was imported from a country outside the E.E.C.
- you cannot clearly identify the manufacturer
- the manufacturer is no longer in business
Otherwise, the manufacturer is liable – or the processor in the case of the item being manufactured from parts made by multiple suppliers.
Property Owners Liability Insurance
Property owners’ liability insurance enables you to pay any costs and damages given to a member of the public if they be injured as the result of an accident on, or linked to, your premises. This will include the cost of treatment in hospital and ambulance charges claimed by the National Health Service, if somebody is awarded compensation for personal injury.
Generally, it’s a good idea to make sure that property owners’ liability is included within your business policy – you may find it is also included within your contents insurance policy.
Professional Indemnity Insurance
If your business involves selling your knowledge or skills, you might wish to consider taking out professional indemnity insurance.
The product covers your company against compensation claims brought by a client if you have made errors or are deemed to have been negligent in some or all of the services that you provide for them. Professional indemnity insurance will also cover any legal costs.
Most advisers carry professional indemnity cover. If you are a financial adviser, accountant or lawyer, then you are required by law to hold professional indemnity insurance. Professionals such as architects, consultants, advertising and PR agencies, and designers often choose to take out such cover as well.
Business Insurance
Many self-employed tradesmen or owners of small businesses will find that there are liability insurance products designed for their particular trade. These products are sold under a number of labels such as self employed liability insurance, tradesmans insurance, small business insurance or business insurance. These products will normally include a variety of individual sections comprising public and employers liability, combined with appropriate sections from legal expenses, professional indemnity and office insurance. A business insurance policy should offer considerable savings compared to buying the individual components separately.