Liability Insurance – Is your Cover Adequate?

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Liability Insurance

Small businesses as well as large ones can have catastrophic losses which may impact on you if your insurance is inadequate.

You have no doubt already purchased Employers, Third Party, Products and Motor Liability insurances to protect your business but are the current indemnity limits high enough?

Levels of Awards in the USA have historically been a multiple of the equivalent in the UK (sometimes as much as 20 times) ; however the range of liabilities which can be incurred by a manufacturer or supplier in the UK means that court awards (especially injury awards) are growing at a much faster rate than inflation.

A company that is faced with a large court award and that does not have sufficient liability insurance cover could suffer severe financial strain, in some cases even having to file for bankruptcy. A cost effective excess liability programme could cover such awards.

Typical Cover:

  • Employers Liability is generally provided to a Limit of £ 10,000,000 Any One Claim or Series of Claims from One Incident – Individual circumstances are different but an accumulation of staff on one location might be a reason to consider the adequacy of this figure.
  • Third Party Liability may be as low as £ 5,000,000 Any One Claim or Series of Claims from One Incident whilst Products Liability is restricted to a Limit which applies is further limited to Any Period of Insurance – Whilst individual circumstances will differ, realistically you should consider at least £ 10,000,000 of cover..
  • Motor Third Party Property Damage Liability is generally provided to a Limit of £ 20,000,000 Any One Claim or Series of Claims for accidents involving Private Cars but is likely to be reduced to £ 5,000,000 for accidents involving other vehicles, including HGV’s – How much damage can a 44 ton vehicle do?

Excess Liability Insurance – Typical Claims Examples

The following examples are provided for illustrative purposes only but are actual accidents which have occurred.

Employers Liability

  • An explosion at a plastics factory killed nine people and injured dozens of others. The cause of the accident was never confirmed but was believed to have involved a gas oven on the premises.

Third Party &/or Products Liability

  • A machinery manufacturer supplied a defrosting machine to a food processing plant. The machine caught fire resulting in the complete destruction of the factory. Total cost was £ 80 MILLION.
  • A retail butcher was allegedly the cause of an E-Coli outbreak arising from the sale of contaminated cooked meats. Twenty people died and many more suffered serious illness. Compensation claims were received from both the injured people and the dependents of the deceased.
  • A clothing manufacturer exported children’s coats to USA. The coats proved to be inflammable, resulting in a number of serious burns injuries. Not only were the awards for damages considerable but the legal and other costs alone exceeded £ 1 MILLION. As with all product claims, a series of incidents quickly leads to the erosion of the limit of liability.
  • A 2-man business working as a sub contractor to the principal contractor on site caused £ 8 MILLION of damage when sparks from welding work they were undertaking started a fire that destroyed a new office block.

Motor Third Party Property Damage Liability

  • A lorry driver lost control of his vehicle which ploughed into a petrol station causing a massive explosion. Fortunately nobody was seriously hurt but damage to the petrol station (including a number of vehicles) was extensive and it was several months before it reopened for business.
  • All 10 carriages of a train derailed when it hit a vehicle at a level crossing. Seven people were killed and 37 injured.

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