Determining appropriate limits of indemnity under employer’s liability, public liability and professional indemnity policies can be challenging for any organisation. This is an area that is fraught with difficulty and ultimately the responsibility for making any decision about the limit of indemnity has to rest with the client. In this bulletin we highlight a number of key points to consider which can help make the process more manageable.
Local authorities, police forces and national health trusts are of course exempt from the requirements of the Employers’ Liability (compulsory insurance) Act. Consequently, they could elect to self-insure the employers’ liability risk. That said, virtually all such organisations arrange employer’s liability insurance, although this will often be subject to a fairly sizeable deductible that is funded by the organisation.
The statutory minimum (other than for offshore risks) is £5 million for claims arising out of any one occurrence. The term ‘occurrence’ is not defined in the regulations and insurers currently treat industrial disease claims as separate occurrences, rather than one occurrence arising from a management decision. Is a limit of £5 million going to be enough? In most cases, the answer to that question has to be no.
Factors that need to be considered include the maximum number of employees on any one site and the possibility that a significant number of those employees could be injured in a single incident. In addition, the policy provides cover for claims caused during the period of insurance , which means that an incident that happens today might not give rise to a claim until many years in the future - by which time the effects of inflation could have seriously eroded the limit of indemnity.
There is no statutory minimum for public liability insurance. In fact, for most organisations, there, is no statutory requirement to arrange public liability insurance but nearly all would regard the cover as an essential part of their insurance portfolio.
When deciding on a public liability limit of indemnity, you need to assess the risk to members of the public and their property, arising from your activities. Once you have assessed those risks, you need to try and quantify your maximum potential liability in the event that the activities you undertake give rise to a claim.
The risks and liabilities will vary from one authority to another. They will be dependent upon a variety of factors including the type of organisation and, consequently, the range of services delivered to the public. For example, a district council that has retained its housing stock could be exposed to significant liability in the event of fire in a multi-storey tower block. For a metropolitan authority, a greater degree of risk may attach to its highways and social services responsibilities.
Involvement in partnerships, joint ventures or just general contracts, can also create additional or increased public liability risks, although it may be possible to transfer the financial consequences of those risks to the other party to the contract.
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For further information, please contact Bill Walker, Risk Management & Sales Executive on +44 (0)20 7558 3272 or email firstname.lastname@example.org.