Unfortunately, liability awards are rising with inflation, too

There are few realms of running a business that haven’t been impacted by social and economic factors.

Unfortunately, this includes the cost of someone successfully filing a claim against you, with damages awarded by the courts to successful claimants having climbed and climbed in recent years.

As a result, you probably don’t have the cover you think you have, with your policy likely no longer suitable for today’s economic climate. In a worst-case scenario, you risk facing not only insurmountable debt, but an uncertain future for your care home.

What makes up the cost of a successful claim?

When people think of a successful claim, they tend to think of the final awarded figure when it comes to considering how much liability cover they need.

But the costs that surround a successful claim tend to be comprised of so much more, including:

• Investigative costs – loss adjusting, third-party background checks, financial accounts, etc
• Legal fees – for you and the claimant
• Medical fees – short-term expenses as well as costs incurred from long-term illness or injury
• Future care needs – in the case that someone is harmed for life by the actions of someone at your company
• Loss of earnings – if the claimant can’t work
• Physical damage – for example, property damage.

It is worth noting that although some insurance brokers are beginning to offer 12 months of business interruption to coincide with potentially smaller claims, the reality is that if your care home has damage that is likely to take over a year to recover, this may end up costing you much more.

For example, if your care home suffers from a flood and due to underlying circumstances within the trade sector, it takes 18 months to repair the damage, you would not be covered for the 6 months you are unable to operate.

At Towergate, we recommend that you look for a policy that offers 24 month business interruption, so you know you will be covered for a longer period of time, should repairs take longer than expected.

The rising cost of damages

As you’ve seen, there are many different components that go into the final figure awarded to successful claimants. But, in recent years, awarded damages have risen to staggering sums – in some cases, to double what they would have been a few years ago.

Complicating matters further are recent social and economic events both in the UK and abroad that have led to a cost-of-living crisis.

There’s also been an upward trend in the damages awarded to claimants by the judiciary. The Judicial College Guidelines found that in 2024 alone, there was a 22% increase in the value of injury claims.^[1] Given these guidelines are reviewed every few years, it shows clearly how the value of a claim, as well as the likelihood of a claim, can increase in very little time.

All these things combined mean it’s more expensive than ever before to be taken to court for negligence.                                                                                                             

Getting ahead of the risk

A few years ago, a limit of indemnity covering you for up to £5,000,000 would have been more than enough a few years ago.

But today, it may barely scratch the surface.

With the cost of damages awarded by successful claims rising, it’s more important than ever that your care home has a solid action plan on how to deal with incidents that could turn into claims.

Find out how Towergate Insurance could assist you

Please email Richard Barnes or call on 07768 314 298.

Sources

[1] Judicial College Guidelines: rate increases - Weightmans

About the author

Richard Barnes has worked as an insurance broker for over 30 years. Richard spent five years working as a specialist construction broker in Sydney Australia where he gained the Qualified Professional Insurance Broker Qualification.

Since his return to the UK in 2008 he has worked for Towergate exclusively supporting social care providers and has been awarded the Cert. CII qualification. Richard is also part of Towergate’s Cyber steering committee supporting clients with this emerging risk.

 

 

Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.