Liability Insurance: An Infographic Guide

If you're a business owner, the likelihood is you'll need some liability insurance. Our infographic explains why it's so important to get covered and the circumstances in which you'll need public, professional, employers, product and director's and officer's liability insurance.

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Liability Insurance: An Infographic Guide text below View transcript

Liability Insurance

  • Public Liability Insurance – Do you come into contact with the public or any 3rd party property?

  • Product Liability Insurance – Do you manufacture or sell products or components?

  • Employers Liability – Do you employ staff?

  • Professional Indemnity Insurance – Do you provide advice to your customers?

  • Directors and Officers Liability (D & O Insurance) – Do you or your staff have any responsibilities within the business that you/they could be individually accountable for?

General Liability Insurance Overview

Definitions

The exchange of risk for a financial premium

A financial device to provide protection against a possible eventuality

Facts

The UK Liability Insurance market 2012,

  • £4.5bn Value of the market

  • 11% of the overall market

  • £525 Underwriting loss made within the industry

(SOURCE:

http://www.lloyds.com/~/media/Files/The%20Market/Tools%20and%20resources/New%20Market%20Intelligence/Market%20Presentations/Europe/gb_mi_2013_12_05%20Market%20%20Presentation.pdf

https://www.abi.org.uk/~/media/Files/Documents/Publications/Public/Migrated/Liability/Insurance%20for%20Small%20Businesses%20a%20guide%20to%20protecting%20your%20business.ashx))

In the UK, business liability claim payouts, every day:

  • £3.3m in 2006

  • £7m in 2012

£8 - £36: The amount a full claim could be worth for every £1 spent on insurance cover.

(SOURCE:

https://www.abi.org.uk/~/media/Files/Documents/Publications/Public/Migrated/Liability/Insurance%20for%20Small%20Businesses%20a%20guide%20to%20protecting%20your%20business.ashx)

Public Liability Insurance

– Do you come into contact with the public or any 3rd party property?

Definition:

Public Liability insurance protects your business in the event of a claim from a member of the public

Although not mandatory for most businesses, public liability insurance is highly recommended for any company.

Costs and advice

£70: typical lowest cost insurance per annum. As with any insurance premium costs can increase with amount of cover required, sector and claims history.

(SOURCE:

https://www.know-insurance.co.uk/business/how-much-public-liability-insurance)

The most common claim type is for a slip or fall.

(SOURCE:

http://www.thompsons.law.co.uk/other-accidents/slip-trip-injury-compensation-claims.htm)

Facts

12% - Increase in Slip and Fall Questionable Claims (SFQCs) in 2011

(SOURCE:

https://www.nicb.org/newsroom/news-releases/slip-and-fall-qc-report)

In Ireland:

  • 25,120 euro: average public liability pay out in Ireland.

  • 11% Average year on year increase in public liability pay outs

(SOURCE:

http://www.advertiser.ie/mayo/article/71055/mayo-compo-claim-payouts-are-above-average)

Strange Fact

$600,000 payout: for a horse dentist after she lost her libido following a fall from a three legged chair in a court room café in Sydney.

(SOURCE:

http://www.inthemix.com.au/forum/showthread.php?t=45937)

Product Liability Insurance

– Do you manufacture or sell products or components?

Definitions

Cover in the event of your product causing loss or damage to a third party person or property.

Although not mandatory, it is advisable for any company that manufactures a product or is involved in its distribution.

(SOURCE:

http://insurance.answers.com/business-insurance/the-risks-of-carrying-inadequate-product-liability-insurance)

Facts

Largest & most famous product liability claim ever made:

Against Philip Morris Tobacco Group in the US (owners of the Marlboro brand) by a 64 year old lung cancer victim who claimed the company never advised her of the risks of smoking - £28bn

(SOURCE:

http://money.cnn.com/2002/10/04/news/companies/philipmorris/)

Combined market size for product and public liability market in 2013 stood at £2.9bn

Growth of public & product liability premiums

  • These markets had grown year on year at 8.8% from 2009 to 2013

  • 8.6% in 2012

  • 19.5% in 2013

They are expected to grow further due to:

  • Increased number of private sector businesses

  • Strengthening of the economy

  • Increasing demand for manufacturer’s products

(SOURCE:

http://www.reportlinker.com/p02268180-summary/Public-and-Product-Liability-Insurance-in-the-UK-Key-Trends-and-Opportunities-to.html)

General Motors March 2008:

$400-$800: Amount paid out each to over 35,000,000 customers

In the region of $20bn: Following claims that engine coolant was causing engine damage.

(SOURCE:

http://www.evancarmichael.com/Retail/3795/6-Largest-Products-Liability-Insurance-Suits.html)

Costs and Advice

In the UK, the claim can be made against the manufacturer of a product by anyone, not just the purchaser.

Customers may lose their rights to product liability insurance on the purchase of stolen goods.

Cost of claims: Against a company whose products caused damage or loss can start from £275 and have no upper limit.

For a manufacturer, it is important that components are installed correctly as you

They may be held liable for failure if a component affects the product.

(SOURCE:

https://www.gov.uk/product-liability-and-safety-law#liability-consequences)

Employers Liability

– Do you employ staff?

Definition

Employers Liability Insurance protects a business against a claim from staff who have been injured or made ill by their work either on or off site.

Volunteers, Apprentices and self-employed sub-contractors are not automatically insured under employer’s liability insurance.

Although such cover is not mandatory, in the event of a claim the courts may confirm that the business still has a duty of care for such employees. If your business employs workers in such capacity it is advisable to speak to your provider to arrange cover.

(SOURCE:

http://www.hse.gov.uk/pubns/hse39.pdf)

Costs & Advice

In the UK: Annual costs start around £250pa

(SOURCE:

http://www.towergateinsurance.co.uk/liability/employers-liability-insurance)

Mandatory for any company employing staff in the UK.

Failure to properly insure your business with employers liability cover can result in a £2500 fine.

£5m: The minimum level of Employers liability cover any company must have in the UK.

(SOURCE:

https://www.gov.uk/employers-liability-insurance)

Facts

Employment Tribunals have fallen by almost 55% since the introduction in 2013 of up-front fees to make a claim against an employer.

(SOURCE:

http://www.dailymail.co.uk/news/article-2528156/Employment-tribunal-cases-fall-half-staff-charged-claim-Levies-introduced-fears-growing-claims-culture.html)

£1,419m: approximate total cost of insurance premiums paid by companies in 2010/11 in the UK.

(SOURCE:

http://www.hse.gov.uk/statistics/pdf/cost-to-britain.pdf)

£744m: Amount UK insurers paid out in 2011 to people who were injured whilst at work.

(SOURCE:

https://www.abi.org.uk/~/media/Files/Documents/Publications/Public/Migrated/Facts%20and%20figures%20data/UK%20Insurance%20Key%20Facts%202012.ashx)

£123,000: Amount victims of fatal Asbestos induced cancer will receive in compensation if they are unable to locate a company’s employers liability insurance.

(SOURCE:

https://www.gov.uk/government/news/asbestos-victims-to-get-123000-in-compensation)

£20,500: The amount a trainee hairdresser in Sheffield was awarded in compensation against an employer who repeatedly racially and sexually abused her.

(SOURCE:

http://hrdiversity.co.uk/bullying-case-law-and-histories/)

£800,000: Amount awarded to a teaching assistant in Lancashire after she tripped at work and dislocated her finger and injured her elbow upon an empty wheel chair which she was moving in 2003

(SOURCE:

http://www.dailymail.co.uk/news/article-2236412/Huge-800-000-payout-Teaching-assistants-award-tripping-wheelchair.html)

Professional Indemnity Insurance

– Do you provide advice to your customers?

Definition

Professional Indemnity insurance protects a business when they have given negligent advice to a customer.

Costs & Advice

£200-£500: Professional Indemnity costs per annum.

(SOURCE:

http://www.lawontheweb.co.uk/Article_Directory/Professional_Negligence/Indemnity_insurance_-_covering_the_basics)

6 years: The time within which most professional negligence claims must be made.

(SOURCE:

http://www.wrighthassall.co.uk/expertise/professional-negligence/)

Quite often cover will go up to £100,000. Professional services such as solicitors, accountants and many more may be much higher and a company dealing with a government department may be required to have a minimum £5m cover.

(SOURCE:

http://www.lawontheweb.co.uk/Article_Directory/Professional_Negligence/Indemnity_insurance_-_covering_the_basics)

Facts

Professional Negligence Claims: Reaching the high court fell considerably by 74% in the Chancery Division (of the High Court) from 2009-2012

(SOURCE:

http://www.clydeco.com/uploads/Files/CC004198_Litigation_Trends_05_11_13.pdf)

In 2011 only 125 professional negligence cases reached the High Court Chancery Division, a fall of 19 from the year previous.

((SOURCE:

(http://www.legalfutures.co.uk/latest-news/good-news-day-solicitors-strike-offs-negligence-claims-fall)

(£7.65m: The amount the High Court ordered Wragge and Co to pay out to Amalgamated Metal Corporation for providing negligent tax advice.

((SOURCE:

(http://www.wilson-nesbitt.com/news-updates/Professional-Negligence/4682/7-65m-payout-in-professional-negligence-case)

(The fall in professional indemnity claims comes as a result of changes imposed by the Jackson Reforms, which changed the way in which civil litigation proceedings were managed. For example the reforms placed more responsibility on parties to settle claims out of court.

((SOURCE:

(http://www.bottonline.co.uk/articles/guide-to-jackson-reforms)

(£186,000 Claim: Amount a woman in Devon successfully claimed in damages from a solicitor who failed to inform her of a restrictive covenant preventing a property extension after works had started.

(SOURCE:

http://www.lawgazette.co.uk/law/appeal-court-sets-aside-186k-professional-negligence-claim/5041345.article)

Directors and Officers Liability

(D & O Insurance) – Do you or your staff have any responsibilities within the business that you/they could be individually accountable for?

Definition

Directors and Officers insurance covers any legal costs and losses when a director or officer is being held personally liable for negligent behaviour within the confines of their role.

(SOURCE:

https://www.abi.org.uk/Insurance-and-savings/Products/Business-insurance/Liability-insurance/Directors-and-officers-liability-insurance)

Costs and Advice

The costs of D & O Insurance depend on numerous factors including the company and market sector, with prices constantly subject to fluctuations.

(SOURCE:

http://www.entrepreneurship.org/resource-center/considering-dandampampampo-insurance.aspx)

Facts

Over 75 years old
Dates back to the Great Depression of the 1930’s.

(SOURCE:

http://www.cirmagazine.com/cir/full-circle.php)

Directors of investment firm TBO investments where pursued under their d & o liability insurance for a claim of £2m by a client who had requested a low risk investment only to find their investment had been made in high risk assets.

(SOURCE:

http://www.independent.co.uk/incoming/former-ukip-bad-boy-godfrey-bloom-horrified-as-his-firm-is-fined-for-gambling-couples-2m-9672315.html)

0% change in price. The average cost of D & O insurance premiums over the last few years has broadly remained the same.

SMEs represent the greatest area of growth for insurers in the D & O markets.

(SOURCE:

www.datamonitor.com/store/Download/Brochure/?productId...007 UK Directors’ and Officers’ Insurance 2012 The D&O market has continued high capacity, keeping rates flat. How are firms competing and where can growth be found?)

The D & O Insurance Market grew by 4% in the UK in 2011.

The amount in written premiums for D & O insurance in the UK:

  • £480m in 2011

  • £550m expected in 2016

Glossary of Terms

Premiums – the cost of the insurance.

Underwriting – the process of assessing the risk by which a customer may make a claim under their insurance.

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