Any business faces risks – ranging from risks from competitors to changes in raw material costs, changes in regulation and trading agreements to simply the loss of demand from customers resulting in falling sales, lost revenue and falling profits. Most of these risks cannot be insured as they are considered simply part of the challenge of running a business or providing a service. However, most businesses do have assets that need protecting and the threat of liability claims for any actions, products or services that they provide causing loss or permanent harm to other parties.
New and evolving risks, such as cyber crime, mean that any business needs to actively review and assess their risks, seeking to minimise, mitigate or transfer risks wherever possible.
Fundamentally, however, businesses around the world face the same broad type of risks:
- Your potential liability to third parties
The team at Hayward Aviation have been supporting our clients for over 25 years as they grew and developed their business. While many of our clients have businesses directly linked to the operation of aircraft (airports, engineering workshops, ground handling companies, fuel suppliers etc) many of our clients’ businesses have no specific aviation exposures – but we have been able to help them, leveraging our expertise and knowledge of the main asset and liability policies, to help our clients develop effective insurance and risk management programmes.
Outlined below is a brief description of the main insurance policies a business may need to consider. We recognise that there is significant country by country differences in minimum requirements and different insurance jargon and terminology and we have not sought to represent the full details of policies and/or exclusions. This information is therefore FOR INFORMATION PURPOSES ONLY. Please consult us to obtain more detailed advice and information.
Damage to your assets
A property damage (also known as material damage and asset protection) policy protects the policy holder in the event of damage to the physical or material assets of the business. The main items insured are buildings, machinery and plant, stock and other contents. Separate sums insured may apply to each of these items. For very large risks, insurers often cover the insurances of all property of each type at all locations, provided that the total value at any one location does not exceed a pre-agreed limit.
Premiums are generally calculated by applying a rate to the various sums insured. The rate(s) applied will reflect a variety of factors including the trade, the special perils insured, construction of the premises and heating, housekeeping and the presence of fire protection equipment.
Commercial All Risks
A common type of policy is ofter known as a Commercial All Risks policy which can provide cover for accidental loss or destruction of or damage to the property insured. All types of loss or destruction of or damage to the property insured are covered provided that the cause is not specifically excluded from the policy.
Business interruption insurance is often also known as consequential loss and/or loss of profits.
If a business premises is destroyed or damaged by, for example, fire - apart from the physical damage - the business may also suffer a loss of income from which to pay the expenses of the business and make a profit. You may also incur extra costs, such as renting alternative premises, in order to maintain the turnover of the business. Both of these losses can be covered by business interruption insurance.
There are generally two key elements to a business interruption policy:
- the time period for which the interruption will affect the business (known as the indemnity period); and
- the maximum amount that needs to be insured (called the Gross Profit).
Every business or organisation has a legal duty to behave in a reasonable manner towards others. Those who fail to do so may be legally obliged to pay compensation to anyone who is injured or whose property is damaged as a result of their actions. These liabilities can arise through the careless or negligent acts of business owners and their employees, due to defects in property or goods and services supplied, or under certain national and international laws which impose liabilities.
In addition, even if the business owner was not the cause of alleged injury or damage, the costs and expenses incurred in taking legal advice and defending an action in court can be substantial.
To meet these liabilities and costs and expenses, a range of liability insurances are available including:
- directors' and officers' insurance; and
- professional indemnity insurance.
Because of the national difference in legislation and legal practice, liability policies are generally issued on a country by country basis with additional excess liability policies, where necessary. The terminology used in a liability policy is specific to each country of domicile and the prevailing legal code in operation e.g. English Law etc.
Employers' liability insurance (or local equivalent) is generally compulsory in every country. As an employer, you must be insured against liability for bodily injury or disease sustained by your employees arising out of and in the course of their employment in the business. This must be under an approved policy with an authorised insurer. In the UK the minimum level of cover is GBP£5 million in respect of all claims arising out of any one occurrence.
It is more common to issue combined liability policies which include employers', public and products liabilities within one policy document.
Cover may be limited by an insurer as part of the underwriting process by applying clauses which:
- restrict the definition of the 'business';
- exclude certain kinds of work;
- exclude certain machines and/or processes.
Cover for aviation-related activities are often excluded under a standard policy.
Public or General Third Party liability
This covers legal liabilities in respect of claims by third parties (members of the public or other companies) for injuries suffered or property damaged arising out of the business. This could arise, for example, if a customer injures their leg due to slipping on a wet floor when visiting the premises.
A public liability policy provides an indemnity to the insured for legal liability to third parties for damages in respect of accidental bodily injury, death, disease or illness, and for any loss of or damage to property which happens in connection with the business insured under the policy and occurring during the period of insurance. The legal costs of both the claimant and the insured are included in the cover, as well as legal costs and expenses in defending prosecutions under relevant.
For companies involved in the aerospace sector, a specialist Aviation Products, Hangar keepers and Premises insurance legal liability policy provides cover for the risks specifically arising from aviation activities.
This covers liability arising from goods sold or supplied which cause injury or damage to customers or their property.
The standard policy covers legal liability for bodily injury or property damage, happening during the period of insurance, which arises out of goods or products manufactured, constructed, altered, repaired, serviced, treated, sold, supplied or distributed by the insured. The legal costs of both the claimant and the insured are included in the cover.
For companies involved in the aerospace industry you must arrange a specialist aviation products liability policy. Please contact us for further information.
Professional indemnity insurance
Professional indemnity insurance is a specialised branch of liability insurance which is not offered by all insurers. Policy wordings vary greatly in the market.
A professional indemnity policy is designed to offer protection to professional people against potential claims for injury or loss resulting from their actions, advice or failure to carry out their professional duties.
Directors' and officers' insurance
This is a specialist cover which offers cover to individual directors (or officers) of a company arising out of a failure to carry out his or her legal responsibility.
This specialist cover is not widely available and varies from country to country.
A policy is generally structured in 2 sections:
- Directors' and officers' liability: cover for the directors and officers in their personal capacity when they are unable to claim an indemnity from the company; and
- Corporate reimbursement: cover to protect the company in circumstances where it is permitted to indemnify the directors or officers, such as the repayment of legal defence costs.
For more detailed assistance in relation to this type of insurance protection, please contact us.