Legal liability insurance: just how much is enough?

Intermediary Liability Insurance Product 3 min read 13 June 2017

Most business owners know that they must protect business belongings against damages, whether it be buildings, stock, machinery or vehicles. The cost of replacing physical property can easily be determined through adequate valuations, however the financial cost of a potential third party claim is something that is incredibly difficult to foresee. We look at the importance of legal liability for businesses beyond the obvious things such as slips and trips, dangerous products, etc. 


How much liability cover is enough?


One is tempted to say ‘how long is a piece of string?’ but liability cover is not a fickle issue. Firstly, businesses must realise that a liability claim can very likely bankrupt them. Secondly, it is impossible to imagine what could go ‘wrong’ in a business environment. It’s important that intermediaries work closely with clients to determine the highest and widest indemnity cover a client can afford to eliminate the risk of financial ruin. 


Difficult to predict the who, what and where of injuries 


Business owners rarely know who may sustain injury through their business activities. Bear in mind that no-one can predict who will be injured on your client’s premises or by their products, or what the nature of this injury might be. Furthermore, the amount claimed for loss of income will be determined by the duration that the injured party is unable to work for and the nature of the third party’s employment at the time of being injured, i.e. a specialist surgeon versus an unskilled factory worker.


Similarly, you do not know if someone will break their arm during an unforeseen accident, or whether they end up as a paraplegic or quadriplegic, thereby requiring income and medical assistance for the rest of their lives. 


Why public liability cover?


Even businesses with the best intentions and exceptional quality control in their manufacturing and other processes are not immune to third party approaches. Businesses rely on employees and subcontractors to carry out their work. No matter how thorough their processes are or how well they are supervised, accidents and mistakes can still happen.


Liability insurance exists to make a difficult situation more bearable for the insured party. Business owners have enough to deal with in the day-to-day running of their businesses. Therefore, they should consider purchasing insurance that adequately covers them in the event of a third party approach so that they can continue to focus on their business whilst the insurance company takes care of the claim. 


What public liability cover should include


Liability claims can put someone out of business if they are not adequately insured. Public liability and other liability cover should not only provide for settlement amounts and/or court awards, but also for the legal costs arising in the defence of any cases brought against the insured business. The legal costs can often form the largest portion of a liability claim – and these costs are steadily rising.


Third parties frequently approach attorneys to claim damages from businesses on their behalf. This immediately means that there are legal costs involved and usually means that the business has to hire their own attorney to assist them. With Santam’s liability cover, your clients will obtain assistance with these approaches. Santam employs experienced attorneys to assess each third party claim for its merits and then determine whether it is a valid claim and what action needs to be taken.


Other liability products – such as cover for cyber liabilities, product recall and legal liability arising from professional advice – are also on offer, so be sure to familiarise yourself with these products to help protect your clients against all common liability risks. Get in touch with your relationship manager if you have any queries. 


For more advice tailored to intermediaries, visit our blog for useful product-related articles – such as the insurance businesses need for adequate liability protection.