We live in a litigious society, where members of the public are well within their constitutional right to sue companies that fail in a duty of care towards safety and security while on their premises.
Simple signs like ‘contents may be hot’ on a cup of coffee might seem like overkill, but when you’re slapped with a large payout request because a customer has been injured, it’s not quite as amusing as you thought!
What is Liability Insurance?
Liability insurance is a type of insurance for businesses that covers them should a customer or member of the public make a claim against them. Its vital insurance for all businesses that deal with members of the public, and failure to take out such a policy may be in breach of some states’ laws.
Personal injury lawyers, such as Brown & Crouppen, have pages of reports where injuries have happened on business premises and compensation has been offered; without insurance, this can be a very costly issue for businesses and may end up in bankruptcy.
Liability insurance doesn’t claim that you were in the right if you are sued due to an accident, there’s every chance that actually you weren’t in the right, and you deserved to be sued, but it will help cover legal costs, and compensation should a claim arise.
All liability insurance covers are different, and it really is important for you to read the small print and understand exactly what you’re covered for before you take out an insurance policy for your business.
Liability Insurance Vs. Indemnity Insurance
If you’re new to running your own business, you may be wondering what the difference is between indemnity insurance and liability insurance and whether you need both.
In simple terms:
- Liability insurance – this type of insurance covers you should a claim be made against you for injuries or similar to have happened to a member of the public, an employee, a client, or a customer, etc., on your premises or as a result of your product malfunction.
- Indemnity insurance – indemnity insurance covers your work, of you work with clients, to cover you if your client claims that your work has damaged their reputation, for example.
If you work with clients providing a service, like graphic design, for example, it is vital that you take out indemnity insurance. Should you come into contact with a client whose honesty isn’t quite what it should be, they may claim that your work has cost them business.
Indemnity insurance doesn’t cover injuries resulting from your product but rather the damaging of their professional reputation as a result of your service. Your client may wish to claim that as a result of your service, they have lost money (and they’d need to prove this); this is what indemnity insurance covers.
As a side note, you should always have a section in your client contract that states you cannot be 100% certain that work will be returned to the client completely error-free, and make a note that the client should always be doing the final check to ensure they are happy with your work before they use it.