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Liability Insurance

Liability insurance is a part of the general insurance system of risk transference. Originally, individuals or companies that faced a common peril, formed a group and created a self-help fund out of which to pay compensation should any member incur loss. The modern system relies on dedicated carriers to offer protection against specified perils in consideration of a premium.

Liability insurance is designed to offer specific protection against third party claims, i.e., payment is not typically made to the insured, but rather to someone suffering loss who is not a party to the insurance contract.

Liability Insurance

Generally, damage caused intentionally and contractual liability are not covered under liability insurance policies. When a claim is made, the insurance carrier has the right to defend the insured. The legal costs of a defense are not always affected by any policy limits, which is useful because they can be significant where long trials are held to determine either fault or the amount of damages.

In certain countries, liability insurance is a compulsory form of insurance for those at risk of being sued by third parties for negligence.

The most usual classes of mandatory policy cover the drivers of vehicles, those who offer professional services to the public, those who manufacture products that may be harmful and those who offer employment.

The reason for such laws is that the insured is deliberately engaging in activities that put others at risk of injury or loss.

Public policy therefore requires that such individuals should carry insurance so that, if their activities do cause loss or damage to another, money will be available to pay compensation. In addition, there are a further range of perils that people insure against and, consequently, the number and range of liability policies has increased in line with the rise of contingency fee litigation offered by lawyers.  Such policies fall into three main categories:

Public Liability

Industry and commerce are based on a range of processes and activities that have the potential to affect third parties (members of the public, visitors, trespassers, sub-contractors, etc. who may be physically injured or whose property may be damaged or both).

Regardless of compulsion, however, most organizations include public liability insurance in their insurance portfolio even though the conditions, exclusions, and warranties included within the standard policies can be a burden. A company owning an industrial facility, for instance, may buy pollution insurance to cover lawsuits resulting from environmental accidents.

Those with the greatest public liability risk exposure are occupiers of premises where large numbers of third parties pass through, including shopping centers, pubs, clubs, theaters, sporting venues, markets, hotels and resorts. The risk increases dramatically when consumption of alcohol and sporting events are included. Other industries such as security and cleaning can be considered high risk by underwriters.

Private individuals also occupy land and engage in potentially dangerous activities. For example, a rotten branch may fall from an old tree and injure a pedestrian, and many ride bicycles and skateboards in public places.

Products Liability

Product liability insurance is not a compulsory class of insurance in all countries, but legislation such as the UK Consumer Protection Act 1987 and the EC Directive on Product Liability (25/7/85) require those manufacturing or supplying goods to carry some form of protection, usually as part of a combined liability policy.

The scale of potential liability is illustrated by cases such as those involving Mercedes-Benz for unstable vehicles and Perrier for benzene contamination, but the full list covers pharmaceuticals and medical devices, asbestos, tobacco, recreational equipment, mechanical and electrical products, chemicals and pesticides, agricultural products and equipment, food contamination, and many other major product classes.

Employers Liability

Policies have been developed to cover any liability that might be imposed on an employer if an employee is injured in the course of his or her employment. Insurers are prohibited from including conditions within their policies that seek to impose any unreasonable conditions precedent to liability, or require the insured either to take reasonable precautions or to comply with current legislation and regulations. In countries where such insurance is not compulsory, smaller organizations are often driven into bankruptcy when faced by claims not covered by insurance.
Many of the public and product liability risks are often covered together under a general liability policy. These risks may include bodily injury or property damage caused by direct or indirect actions of the insured.

For further information or a quotation call Quadris Insurance Brokers on:
0208 144 1271 or email us insure@quadrisinsurance.co.uk

 

 

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