Liability Insurance

If someone is injured or their property is damaged, the person or business responsible may be sued and held legally liable for the injury or property damage. Where legal liability is established, damages will be awarded to the claimant to compensate them for their injury or the damage to their property. Where damages have been paid for an injury, the NHS is entitled to recover costs for hospital treatment, including ambulance costs. The person or business responsible will also need to pay legal costs, including the claimants'.

Liability insurance is designed to protect your business against these costs.

If your business has employees, it is likely that employers' liability insurance is compulsory.

Public Liability

If members of the public or customers come to your premises or you go to theirs (including if you work from home), you should think about taking out public liability (PL) insurance.

What the insurance covers

PL insurance covers any awards of damages given to a member of the public because of an injury or damage to their property caused by you or your business. It also covers any related legal fees, costs and expenses as well as costs of hospital treatment (including ambulance costs) that the NHS may claim from you. 

 Premiums are based on the type of business and rated on an estimate for the level of activity of the business. For most businesses this will be the turnover, although other factors may be used. Talk to a professional

There are many conditions, exclusions and warranties that can be applied to PL policies. It is therefore important that you discuss your policy with T.I.C. Insurance Brokers to ensure that it meets your needs.

Employers' liability insurance

Employers' liability (EL) insurance enables businesses to meet the costs of damages and legal fees for employees who are injured or made ill at work through the fault of the employer. Employees injured due to an employer's negligence can seek compensation even if the business goes into liquidation or receivership. The NHS can also claim the costs of hospital treatment (including ambulance costs) when personal injury compensation is paid. This applies to incidents that occur either on or after 29 January 2007.

By law, an employer must have EL insurance and be insured for at least £5 million. Most insurers automatically provide cover of at least £10 million. Your EL insurance must cover all your employees in England, Scotland, Wales and Northern Ireland.

If your business is not a limited company, and you are the only employee or you only employ close family members, you do not need compulsory ELCI. Limited companies with only one employee, where that employee also owns 50 per cent or more of the issued share capital in the company, are also exempt from compulsory EL insurance. However, there is nothing to prevent an exempt employer from choosing to buy EL insurance, and many do, in view of the financial security it can provide.

The Health & Safety Executive (HSE) is responsible for enforcing the law on EL insurance. You can be fined up to £2,500 for each day that you do not have appropriate insurance.

Generally, someone is defined as your employee if:

• they are under a contract of service
• you deduct National Insurance contributions and income tax from the salary you pay them
• you control when, where and how they work
• they cannot employ a substitute when they are unable to work

Many EL policies available from T.I.C. Insurance Brokers contain a wide definition of employee that will cover most circumstances.

Displaying your EL compulsory insurance certificate and HSE inspections

When you take out a policy you will receive a certificate of employers' liability compulsory insurance.

You must display a copy of this document where employees can easily read it. You can display it either:

• as a paper copy, eg as a photocopy pinned to a notice board
• electronically, eg as a page on your intranet or as a document in a shared folder on your network

You also need to make these certificates available to health and safety inspectors on request.

If you do not display your EL compulsory insurance certificate or refuse to make it available to HSE inspectors when they ask, you can be fined up to £1,000.

You are strongly advised to keep, as far as is possible, a complete record of your employers' liability insurance. This is because some diseases can appear decades after exposure to their cause and former or current employees may decide to make a claim against their employer for the period they were exposed to the cause of their illness. If you fail to hold the necessary insurance details you risk having to meet the costs of such claims yourself.

Product liability insurance

In product liability insurance terms, a product is any physical item that is sold or given away.

Products must be 'fit for purpose'. You're legally responsible for any damage or injury that a product you supply may cause.

Your responsibilities

If you supply a faulty product, claimants may try to claim from you first, even if you did not manufacture it. You'll be liable for compensation claims if:

• your business' name is on the product
• your business repairs, refurbishes or changes it
• you imported it from outside the European Union
• you cannot clearly identify the manufacturer
• the manufacturer has gone out of business

Otherwise, the manufacturer is liable - or the processor, where the product involves parts from multiple manufacturers.

However, you must also:

• show that the products were faulty when they were supplied to you
• show that you gave consumers adequate safety instructions and warnings about misuse
• show that you included terms for return of faulty goods to the manufacturer or processor in any sales contract you issued to the consumer
• make sure that your supply contract with the manufacturer or processor covers product safety, quality control and product returns
• have good quality control and record-keeping systems

What is covered

Product liability insurance covers you against damages awarded as a result of damage to property or personal injury caused by your product. If damages are paid for personal injury, the NHS can claim to recover the costs of hospital treatment (including ambulance costs). This applies to incidents that occur either on or after 29 January 2007.

Product liability insurance may not cover you against financial losses to a business or person caused by a faulty product which you manufactured, serviced or supplied. Product liability insurance also covers you against unforeseen circumstances, such as product faults your quality control system couldn't trace. However, if you simply make an inferior product, you may be unable to make a claim, or even get insurance. Bad workmanship is not covered either.

Before issuing a policy your insurer will want to know that your:

• manufacturing or services are conducted according to industry best practice
• staff are adequately trained
• equipment and systems are appropriate, up to date and well maintained

How much cover to take out

Most businesses have cover of between £1 million and £5 million. The norm is £2 million.

Implementing quality control measures may help to reduce your premiums and will certainly reduce the risk of compensation claims and protect your reputation in the marketplace.

Protecting either your business, your employees, your customers or yourself can be a very daunting challenge to know if you have all the right protection in place and to ensure you are operating within the Law. At T.I.C. Insurance Brokers we have highly experienced liability insurance advisors who can help & ensure you have the right covers in place.

Please contact us at any of our offices for a FREE No Obligation review of your liability insurance requirements.

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