PUBLIC LIABILITY INSURANCE: A MUST-HAVE INSURANCE FOR ANY BUSINESS

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Why Public Liability Insurance? The public liability insurance policy provides a broader form of liability coverage. It is also referred to as general liability insurance. Firms should effect such an insurance policy because there are risks associated with running a business. Trades such as construction were some of the first to seek this more comprehensive form of liability coverage due to the dangers that their activities posed to the general public. This further developed into other trades, including manufacturers, retailers, wholesalers, shopping malls, general dealers, and any other distributors of goods and services. The range of potential buyers of public liability insurance is thus very extensive.

What are the risk assessment factors that the business should consider? The level of exposures the firm has in terms of public liability on any given premise. Unlike property insurance, with liability, it has to be established what possibility of claims that may arise. The businesses liability risk assessment can be put into two main categories, and that is the premises’ risk and the work-away risk arising from work carried out by the insured elsewhere. It is essential to discuss these broad categories with some examples so that we all understand because it affects how you structure the policy itself. Some insurance brokers skip this part of the assessment and fall short in the advisory notes or renewal recommendations. 

Premises’ liability risk assessment involves answering the questions on what is the potential for an accident happening at the insured’s premises? What are the defects or dangers that are at the premises? By merely listing these, the firm will start to see the exposures.

The state and condition of the buildings or plant in question determine the level of exposure. Dilapidated and ageing facilities, one is almost sure that the roof leakages or the non-functional drainages might result in a claim from the customers or any third parties. Roof inspections should be done regularly by building owners and watch-out for blockages that cause spill-overs. There are building fixtures and fittings that might be hanging and not correctly fixed. Losses will occur and liability from head injuries or vehicle damages parked near the buildings.  The material used on the floor is a vital aspect related to injuries due to slippery floor. Supermarkets use smooth ceramic tiles, and when cleaning floors with soapy water makes them slippery and dangerous for the public.

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The degree of danger presented by the activities conducted at those premises. The business activities are a source of liability, and the degree of danger can be determined in a broad form. If the business is processing plastic or fuel products, the risk is high because of the flammability of the material involved. The degree of the fire spreading to the neighbouring premises is increased. The mining activities are high risk when it comes to the blasting of rocks in the opencast. The pollution caused by the cement factory has a serious danger to the general public. Welding is also a high risk to the fire flares that are generated.  The access of these premises by the public makes it imperative that the business correctly assesses the risk and buy adequate cover for such. Last year a loss happened when a client was visiting a mine for marketing their products. The blasting was in progress, and a big flying stone rendered the vehicle a total loss, and it was parked in the designated area.

The degree of public access and the extent of the presence determine the level of risk exposure. If the general public has access, and there are no restrictions, the risk will be high. If you are constructing in a built-up area and along main roads, the exposure will be increased. The business should then consider the appropriate limit of the liability weighing this exposure. The same construction project, when it is carried out in a lesser population density, the risk becomes lower. Consider a local authority in the form of the City of Maseru. It offers a range of services to the public which can easily result in it being sued if those services are negligently provided leading to injury, for example, failing to maintain facilities used by children in a public park run by the authority. 

The presence of other tenants or occupiers on the premises affects the liability risk. The risk increases with the number of tenants the business will have. The type of tenants also influences the risk as well. If you have litigious tenants or occupiers, your liability risk will be higher, and the business needs to have a substantial cover. It is common to find the public liability cover being high if there are more tenants. People operating in the hospitality industry also need to consider the nationalities of the tourists to determine the exposure. It’s generally agreed that Germany, USA and Canada nationalities are litigious, and hence liability risk is high. Last year a claim for hair damage for a tourist was lodged in our market. This was caused by detangling when it got into contact with some rough walls and by an improperly fixed headboard in an apartment.  

The nature and proximity of surrounding property to the insured’s premises determines liability risk. The distance between the business surrounding property can result in damages to emanating from one’s business or activities. The nature of such properties, which includes the type of construction and to the business premises, determines the level of risk exposure. If the general public has access, and there are no restrictions, the risk will even be higher.

The legal and social environment should be considered when assessing liability risk. The legal requirements may be in the form of the minimum public liability insurance. It could be in the form of other legal statutes that gives responsibility to the business. Contractual requirements for some projects detect that you put in place public liability insurance. The current social environment in this country is becoming litigious as the general public’s appetite for exercise their rights and pursue justice is developing faster.

Work-away liability risk assessment involves answering the questions on what is the potential for an accident arising from work carried out by the insured elsewhere. This is the most forgotten part by most of the insurance advisors, and you find public liability policies without the work-way policy extensions. Recheck your policy and establish where it has the cover for work-away risk. We will discuss some possible cover extensions to cover your work-way risks. 

Who Needs Public Liability Insurance? Any firm whose business involves some form of interaction with members of the public is exposed to the sort of risk that public liability insurance is intended to cover. However, other risks are more appropriately insured under separate insurance contracts are excluded. An example of such includes the motor third party liability, workman compensation, employers’ liability and professional indemnity. Get professional advice from the broker on how to put in place the public liability insurance policy.


Amon Rupiyais an experienced insurance practitioner qualified with a Masters in Insurance and Risk Management. He writes in his personal capacity and views does not represent the company he is working for.