Public Liability Insurance

Public liability policy was brought by the general duty of care to others that exist under any of the circumstances discussed on the cause of liability. The policy protects the policyholder:

• In respect of legal liability to third parties for accidental bodily injury to any other person death and disease or illness.
• For any loss or damage to material property for which the insured may be held liable and occurring during the period of insurance.
• For obstruction, trespass, nuisance and interference with any right of way, light, water, etc., which may rise out of or in connection with the business.
• The policy also pays for the claimant costs and expenses including expenses incurred with the written consent of the insurer and cost of representation. Explanations of some words used.

Legal Liability

Refers to all forms of liability e.g., negligence. Trespass. Nuisance, Strict liability, Liability under Statute and Contract and Vicarious liability.

Third Parties

Third parties include,

• Visitors to the insured premises
• Customers while in the premises
• Occupiers
• Passers-by

Accident

This means that the cover is in respect of fortuitous or unexpected events. Not all events which are foreseeable are not accidents within the meaning of the policy. Hence, gradually, operating causes cannot be regarded as accidental. For example, if contractors are in the process of demolishing a building over a period of weeks and dust enters the neighborhood shops, damaging stock, most insurers will not regard this as accidental because there was no specific event    causing the damage even though it was the evitable result of demolition work. On the other hand, if a wall of a building is unexpectedly collapses in the cause of demolition, there has been an accident and the resultant dust damage would be covered by the policy public liability.

Material Property

The word property means real property (building or land) sums of money, good will and similar intangible interests, e.g. copyright, trademark and patents. This is not what insurers intent to cover. They intent to cover the physical damage to material property such as stock, building, and fixtures and not anything else.

Period of insurance

 The accidents must occur during the currency of the policy. It is the policy in force when an’’ accident’’ happens that is liable. In such cases the policy current at time of loss is liable.

Insurers choose between writing the policies on “occurrence or claims made” basis.

Under occurrence basis, the original accident(causes) must be during the period of insurance and the insured must notify the insurer of any event may give rise to a claim.

In contrast, claim made basis is one where the event giving rise to a claim must be after the retrospective date shown in the policy schedule, the claim must first be made against the insured during the period of insurance. Thus, claims made-  basis insures todays’ claim on todays’ premium. The policy covers claim irrespective of when the accident happened. In the effect, this means that the insurers know their liabilities under their policy and have collected the appropriate premium. Notification of an incident or possible loss should constitute to a claim.

Advantages of claim made policy.

• It allows insurers to underwrite the risk more realistically and to close their books once the policy has lapsed.
• Insurer benefits from up-to- date insurance, which will properly have a wider cover and large limits of liability.

Disadvantages.

• At inception, the insured must disclose all past claims and potential claims and events which might give rise to claims in the future. It is often difficult for a proposer to give all full disclosure of all possible claims and the innocent misrepresentation may result in policy cover being voidable.
• Different policy wordings and different interpretations exist relating to when the claim must arrive and when the occurrence must happen.

The business

The injury or damage to property must arise out of and in connection with the insured business. The insurers will confine themselves to the cover of a particular trade or activity which has been disclosed in the proposal

Limit of Indemnity

The policy will also indicate limit of liability. The limit of indemnity is the maximum that will be paid for any one occurrence or accident or series of events consequent on or attributed to one source of or original cause. The limit of liability in relation to any single event must be carefully selected by the insured who must know their business and the circumstances peculiar to that business. The insured has to consider factors like inflation legislation and increasing levels of court awards and cost of claims in fixing the limits of indemnity.

Policy Exclusions

The policy usually has the following exclusions:

• Injury to employees
• Cover to property belonging to the insured or held in trust by or in custody or control of insured
• Any amount in excess of the limit of indemnity except that allowed
• Damage to contract works
• Judgement delivered by or obtained from a court outside the jurisdiction or the geographical area.
• Loss or damage due to faulty or defective design as this is subject of products’ liability
• Any liability recoverable under professional negligence insurance
• Liability assumed under a contract
• Liability arising out of ownership or possession of any motor vehicle.
• Liability due to pollution from defective sanitation war and related liabilities.
• Liability covered under a products’ liability policy

Underwriting

The main underwriting features:

• The type of the business
• The location of the premises
• The construction of the premises
• The activities carried on the premises
• The hazardous materials, application of heat (such as welding) or machinery
• Maintenance of plant or machinery
• Carrying out work on contract sites
• Accessibility of premises by members of the public
• The annual turnover(sales) of the business as this gives indication of the size of the business
• The annual remuneration of employees in respect to work at the insureds own premises and away premises- as this gives indication of the level of activities
• Hiring charges and conditions of hire in respect of vehicles and plants hired in and out

The liability insurance underwriters will need to access all material facts regarding to the risk from the proposal form or in some cases will require a survey carried out in order to decide whether the risk is to be accepted or not. Once the business is accepted, insurers will use the information   about wage roll or turnover as a basis of the premium calculation. The rate of the premium arrived will reflect the risk.

Common Extensions

Indemnity to the principal

The clause extends the benefit of policy to cover both the insured and the principal. i.e. The person who has contracted to do some work for him. The insurer indemnifies the principal for claims arising out of the work done by the insured.

The following conditions apply.

• The indemnity applies in respect of the insured’s employees
• The principal has to observe terms and conditions of the policy as far as they can apply
• The insured must arrange with the principal that the insurer deals with all claims.

Cross Liability Clause

This clause states that if a policy is put into joint names of more than one insured, then it may be necessary to include a cross liability clause to make it clear that the liability of the insured to the other insured is covered by the policy. Hence, under a policy in the joint names X and Y each becomes a separate insured under the policy and damage by X to the property of Y will see Y compensated as though they were a third party.

Indemnity to Employee Clause.

The policy may be extended to provide indemnity to directors and other executives of the insured who may be sued personally or jointly as defendants with their employees.

Inclusion of Property in the Insured’s Charge or Control

Cover to the property in the insured control is actually an exception in this policy. The extension makes it clear that the premises and their contents upon which the insured is temporarily performing work shall not be deemed to be in the insured’s custody and control and shall be therefore be covered in the policy.

Prosecution Costs

Besides being incorporated in the public liability policies, this clause may also be found in the product’s liability and employer’s liability policies. The cover available is in respect of costs incurred by the lawyer including appeal costs engaged with the insurer’s consent to act for or on behalf of any director or employee of the insured in the defense of any prosecution being made for an offence under statutory legislation

Contingent motor liability clause

 Some liability may fall on the insured arising on the use of motor vehicle not belonging to them. For example, an employee may cause an accident while while using a private car on the insured’s business without adequate insurance. A public liability policy can be extended to cover this kind of motor liability.

Contractual liability clause

Contractual liability clause relates to where the insured enters into agreement with imposing liabilities. This extension is found in public liability and in contractors’ insurance where contract conditions are spelt out.

Sports, Social and Welfare Organization Clause

Where the organization provides for sports, social and welfare organization or first aid, medical and ambulance services, then the committee of these organizations can be indemnified in the manner like the insured.

Tools of Trade Risk

These refers to the mechanical plant such as mobile cranes, excavators, bulldozers and the like. An excavator, while in use, can dig underground services, while a crane may damage overhead power cables. The risk of bulldozer causing impact damage to buildings or other property is obvious. This extension is available in public liability policies.