Small Business Liability Insurance

What a thoroughly confusing subject !. We have a huge variety of insurance products called employers liability insurance, public liability insurance and quite a few other “flavours” of liability insurance. There’s considerably more confusion as to what exactly is optional and what is required by law. This article is intended to clarify liability insurance so that we can all select a product to fit our needs and protect our business against claims from members of staff, clients or the general public. We’ll start by talking about the more common types of this version of insurance.

Employers Liability Insurance

Employers are required to look after the health and safety of their employees whilst they are at work. Your staff might be harmed at work or your current or former members of staff, may develop an illness following their endevours while working for you. They might try to claim compensation from you if they think that you have been negligent in your duty to protect their health and safety. The Employers’ Liability (Compulsory Insurance) Act 1969 requires that you have a certain level of insurance protection against claims by employees past or present.

Employers’ liability insurance lets you pay any compensation that is awarded to injuries or illness to your employee’s no matter if they are caused off or on site. However, any injuries and illness as a result of motor accidents that happen while your employees are working for you might be already covered by your motor insurance.

The NHS are likely to claim the costs of hospital treatment (including ambulance costs) when compensation for personal injury is paid.

Employees injured because of the negligence of an employer can seek damages even if the business should go into receivership or liquidation.

By law, employers in the UK must take out ELCI (Employers Liability Insurance) and be insured for at least £5 million. Most insurance companies automatically provide a minimum of £10 million cover. ELCI must provide cover for all of your employees in England, Scotland, Wales and Northern Ireland.

If your business is not a limited company, and you are the sole member of staff or you only employ close family members, you are not required to purchase ELCI. Limited companies with only one employee, provided that the employee owns at least 50% or more of the issued share capital in the company, are also exempt from compulsory Employers Liability Insurance.

Public Liability Insurance

Public Liability Insurance insures against any awards of damages given to somebody because of an injury or damage to their property caused by you, your business or your staff. Furthermore it offers cover against any related legal fees and expenses together with costs of hospital treatment (together with any associated ambulance costs) that the National Health Service might attempt to claim from you.

The cost of public liability insurance depend on the type of business you run, turnover of the business and the number of employees you have.

Certain businesses, e.g. horse riding establishments, are legally forced to hold public liability cover. It is also likely that some of your potential or actual customers require proof of you holding public liability insurance before they will allow you to do business with them.

Product Liability Insurance

When discussing PLI (Product Liability Insurance), a product is any physical item that is given away or sold.

If you supply a faulty product, customers may attempt to claim from you first, even if you did not actually make it. You would be open to compensation claims if:

• your business’ name is on the product – it was manufactured for your brand
• your company fixes, refurbishes or otherwise modifies it
• you imported it from outside the European Union
• it is not obvious which company made the product
• the manufacturer is no longer in business

If none of the above applies, the manufacturer is liable – or the processor where the product involves parts from multiple manufacturers.

Property Owners Liability Insurance

Property owners’ liability insurance enables you to pay any costs and damages awarded to a member of the public if they be injured following an accident on, or linked to, your premises. This might include costs of treatment in hospital and ambulance charges charged by the National Health Service, if someone is awarded compensation for personal injury.

Generally, it’s a sensible idea to ensure that property owners’ liability is included within your business policy – you may find it included with  your contents insurance policy.

Professional Indemnity Insurance

If you are in the business of selling your skills or knowledge, you may want to consider taking out professional indemnity insurance.

The product covers your company against claims for compensation brought by a customer should you have made errors or are deemed to have been negligent in some or all of the services that were provided to them. Professional indemnity insurance also covers you for any legal costs incurred.

Most advisers have professional indemnity insurance in place. If you are a financial adviser, accountant or lawyer, then you are required by law to carry professional indemnity insurance. Professionals including advertising and PR agencies, designers, consultants and architects often opt for such cover as well.

Business Insurance

Many self-employed tradesmen or owners of small businesses will discover that there are liability insurance products designed for their particular business. These products are sold under a number of labels such as small business insurance, tradesmans insurance, self-employed liability insurance or business insurance. These products will normally include a variety of individual sections comprising public and employers liability, combined with a selection from office insurance, professional indemnity and legal expenses. A business insurance policy should offer substantial savings when compared to buying the individual components separately.