Business Liability Insurance

A UK based business is required by law to have business insurance. The number and types of policy that are a legal requirement differ from one business to another. Types of business insurance include public liability insurance, product liability insurance, professional indemnity insurance and tax and VAT investigation insurance.

Your Legal Responsibilities

Managing a business creates considerable legal responsibilities towards your employees, your customers and to the general public. Injury to your employees and members of the public could result in you being legally liable to pay damages if you or your employees have been negligent or found in breach of a statutory duty. 

An employer's statutory duties are set out principally in the Health and Safety at Work Act 1974 and its associated Regulations. You must identify the safety and health needs of your particular business activities by carrying out a risk assessment and take action to remove or control the risks in line with the appropriate legislative requirements. Good management is an ongoing process and when changes are made in your workplace, you should reassess the hazards present. 

Advice on good health and safety management is available from the Health and Safety Executive and local authority environmental health departments. Liability insurance will pay the cost of any court awards or damages, claimants' costs and expenses where you or your employees are held legally liable, subject to any policy limits.

Employers' Liability

By law, all employers must insure against their legal liability for injury, disease or death to employees sustained by them and arising from their employment. Employees will normally include, in addition to those under a contract of employment, apprentices and other trainees and those hired from another employer. The only exception is where all your employees are close relatives and you should check if you think that this may apply to you.

Employers' Liability insurance is a legal requirement and cover is required for at least £5 million but in practice most policies offer £10 million. The law also requires that you exhibit a certificate of employers' liability insurance at each place of work. Failure to meet this requirement could constitute a criminal offence.

Public Liability

Public liability insurance covers your legal liability to pay damages to members of the public for death, bodily injury or damage to their property which occurs as a result of your business activities. It also covers legal fees, costs and expenses such as representation at any coroner's inquest, fatal accident enquiry or other court hearing because of an accident.

When deciding on how much cover to buy, you should carefully consider the maximum claim that could be made against you. Awards for injury can exceed £1 million. Certain businesses, where there is a serious fire or the possibility of multiple personal injuries, could face claims for damages far exceeding this figure. The limit of indemnity will apply to claims arising from a single incident.

Product Liability

If you make, repair or sell products, you could be held legally liable for damage or injury arising from defects in their design or manufacture even if you have not been negligent. Product liability insurance covers you in these circumstances up to a maximum amount each year. The Consumer Protection Act 1987 makes it a criminal offence to supply unsafe consumer goods.

Other Insurance Products

• Material damage insurance: There are several different policies designed to cover assets such as buildings, computer equipment, stock, or contents from loss or damage caused by such causes as fire, flood, theft or other disasters.
• Business interruption insurance: This policy will provide cover for the loss of turnover or trading profits from such damage to property as prevents the normal operation of your business.
• Money insurance: In specific circumstances a successful claim will reimburse you for money that is lost or stolen from the premises, your home or whilst in transit.
• Goods in transit insurance: Covers you for accidental loss, destruction or damage to goods in transit and for the cost of alternative transport if required.

Money Saving Tips

An alternative to purchasing individual insurance products is to buy a 'package policy'. This may well reduce the overall cost and may even allow you to obtain cover if the type of business is open to liability claims that are not quantifiable. A 'package policy' offers the most common insurances required to run your business bundled together in one offering but retaining the flexibility to adjust the coverage to meet your specific needs.

'Package policies' offer a number of benefits:-

• The cover will be comprehensive enough to cover the main risks affecting your business whilst avoiding duplication and overlap of cover.
• Easier to manage because you have a single set of documents, one point of contact and one renewal date.
• Often less expensive as insurers offer a better total premium when they provide all your cover.