Liability risks for businesses – dealing with the unexpected

It can be incredibly difficult for both business owners to estimate how much potential legal liability their ventures carry – much harder to determine than the risk to bricks and mortar assets, stock or vehicles. However, accidents happen all the time and – if a business doesn’t have adequate cover – third party claims can financially cripple or even bankrupt a company. To help you, we’ve put together a few examples of real-life claims that Santam encountered in recent years that would not easily have been anticipated in relation to the business activity: 

• Restaurant: Liability risks in the restaurant business are usually assumed to be related to food poisoning or slipping on food/oil left on the restaurant floor. But in one instance a toddler was hospitalised after ingesting rat poison that he found crawling under the table where his parents dined. A pest control company had recently laid down pellets to get rid of rats and the restaurant did not anticipate that anyone (human) would be able to reach this poison. Many restaurants also now offer playground facilities to entertain kids while mom and dad eat in peace. Unfortunately, a child was recently injured on a trampoline on the restaurant premises, resulting in a R4 million summons. 

• Bakery: At one bakery, a child was injured when a gate fell on the child, resulting in a summons for R900 000. 

• Building owner: A child fell into a lift shaft from the 5th floor of a building. Whilst the negligence of the building owner needs to be proved, any claim involving children is usually a very long process as future medical costs are determined and injuries are assessed in full.   

• Industrial supply company: Guard dogs owned by the business were taken to a grooming salon, where they attacked the person grooming them. 

How you can help a business assess their risk 

It’s clear from the examples that third party claims are often completely unexpected. Even if a business takes care of the actual processes that their business is involved in, liabilities arise out of different aspects of business that the insured may have no or little control over. Advise your clients to always fully disclose their activities and anything that would reasonably be part of that activity.

For example, animals always pose a risk, anything to do with children is extremely sensitive, and so are any adventure activities or equipment. Schedule regular check-ins with your clients to find out if they’ve acquired any new equipment, expanded their services, appointed new suppliers, etc. 

You should also encourage clients to be honest and upfront with you as their intermediary – to inform you of any events that took place that may result in a claim. With the help of Santam’s experienced underwriters and claims staff,  you can assess potential third party claims together, determine whether it is a valid claim and what action needs to be taken. 

What to know about third party claims and liability cover 

Remind clients that a third party claim might not always be lodged immediately – claims by third parties can be submitted up to three years after an incident. This could be because an attorney only got involved at a later stage or if the injured party is a child. In that case, injuries are not always immediately identified and may take years to manifest. Clients should also train their staff to watch out for and report any incidents that take place that may have liability repercussions. 

Through its specialist liability subsidiary, SHA, Santam offers various niche liability cover or cover extensions. Find out more here or get in touch with your relationship manager if you have any queries. Remember that most businesses will require some form of legal liability cover, so this is an excellent opportunity for you to upsell or cross-sell additional cover. 

For more advice tailored to intermediaries, visit our blog for useful product-related articles – such as what private and commercial drone operators need to know about their liability risk and the aviation cover available to them.