Before you choose your indemnity insurance limit, take some time to consider which level of protection you may need if things go wrong.
If you’re not sure where to start, it’s an idea to research the different types of liability claims that can arise in your line of business. If members of the public visit your business premises, there are all kinds of accidents and injuries that can lead to a public liability claim, including trips and falls, any injury from objects and obstructions and hazards.
In some ways, the level of cover you need will be dependent on the kind of business you’re running. Higher risk businesses require higher levels of indemnity cover. Things like regular interaction with the public and dealing with hazardous materials can mean your business is higher risk, whereas you may be lower risk if you only deal with your clients remotely.
Your level of cover can also be determined by your business’ size. If you are responsible for several employees, your requirements will be higher than if it is just you.
A number of factors come into play when calculating liability claims:
The costs of liability claims are continuing to rise and given the current climate, you may wish to consider a higher limit of indemnity. Some facts to consider include:
The cost-of-living crisis is also affecting the costs of insurance liability claims, and there have been significant increases in damages awarded by the court. This could mean a claim could be more than the level of cover you now hold.
To illustrate how settlement figures have changed, a claim for a badly injured 18 year old male:
Don’t forget that if you have one serious claim on your policy, it could involve multiple injuries and claimants rather than just one individual, making claim costs even higher. You therefore want to make sure you have the right level of indemnity cover in your public liability policy.
If a claim is made against you by a third party, you may find yourself liable for their medical expenses, loss of earnings and their legal fees. Costs like these can escalate quickly, so it’s important that you have the correct level of cover in place.
The need to have a higher Indemnity limit is commonly recognised by public bodies, such as local councils, the NHS and some government funded programmes who might insist on a minimum limit of indemnity of £5M in order for anybody to undertake work on their behalf.
It’s also a legal requirement that details of your insurance certificate are displayed where any employees can see it.
It’s easy to adopt the mentality that “it will never happen to me”. Especially when you are in a role that you have been in for a number of years and feel fully competent, but mistakes do happen, and even small mistakes can result in disasters. You could be doing the same job you’ve done countless times before and on that particular day something may not go according to plan. Here are three real case studies from three Towergate customers who fell victim to disaster:
Case study 1
Our customer operated a company that serviced vending machines. After a visit to a client’s premises to service a vending machine the premises burst into flames, the tradesperson responsible was blamed and the client made a claim to seek damages. This claim went on for several years and resulted in a £2 million settlement for the client. If the tradesperson had only taken indemnity cover of £1m, he would have been severely out of pocket.
Case study 2
A property management company we insured, was in the process of renovating one of the properties they had bought with the ambition to let it out. As part of the works, they hired a company to manage the work who subsequently employed qualified tradespeople to undertake the necessary renovations. Once the renovation was complete, a young family with a three-year-old son moved in. The young boy was severely injured and left with brain damage when the marble fireplace fell on him. Despite the work being done by qualified tradespeople and being inspected and signed off following completion, the family sued the company and tradespeople responsible, claiming that the marble fireplace had not been properly secured. The settlement reached was over £2 million.
Case study 3
Another property owner who had insurance with us, was in the process of refurbishing his rental flats and hired a separate company to manage all the refurbishment works. Following the completion of the work, a young man in his 20s moved into the property. One day, the tenant turned on the light. Unfortunately, there was a gas leak which resulted in severe burns, and he was disfigured for life. The young man decided to sue, and a £2 million settlement was agreed against the gas fitter’s insurance.
Increasing your level of indemnity cover is quick and could cost less than you think. Please contact our specialist advisers who can provide you with public liability insurance quotes to increase your cover.
**The figures are taken from Ogden tables which are used by lawyers, actuaries and other experts to assist Courts in assessing lump sum awards for damages to be paid in compensation for financial losses or expenses (such as care costs) directly caused by personal injury or death.
This is a marketing article by Towergate Insurance.
Alison Wild BCom (Hons), MAAT, ATT, Taxation Technician is a highly respected industry professional who has been working with and advising SMEs in areas including tax, pensions, insurance and marketing for over 25 years. She is a member of the Association of Accounting Technicians (AAT) and Association of Tax Technicians (AAT) and also has considerable experience as a residential landlord.
Date: September 20, 2023
Category: Small Business