Small Business Liability Insurance

What a very confusing subject !. We have a whole range of online insurance products called public liability insurance, employers liability insurance and a fair few other "flavours" of liability insurance. There is even more uncertainty concerning what precisely is optional and what the law demands. This article is intended to simplify liability insurance so that we are all able to find a suitable product to safeguard our business against litigation from members of staff, clients or the general public. Let's begin by talking about some of the types of liability insurance.

Employers Liability Insurance

Employers are required to look after the health and safety of their members of staff while they are working. Your employees might be injured at work or your current or former members of staff, may become ill as a result of their work while working for you. They could try to sue you for damages if they think that you have been negligent in your duty to protect their health and safety. The Employers’ Liability (Compulsory Insurance) Act 1969 dictates that you hold at least a minimum level of liability insurance cover against claims by employees past or present.

Employers’ liability insurance will enable you to meet the cost of compensation for injuries or illness to your staff whether they occur on or off site. However, any injury or illness relating to motor accidents that take place whilst your staff are on company business might be covered separately by your motor insurance.

The NHS might also claim the costs of hospital treatment and ambulance costs when compensation for personal injury is paid.

Employees suffering injury due to an employer's negligence can seek compensation even if the business should go into receivership or liquidation.

By law, employers in the UK must hold ELCI (Employers Liability Compulsory Insurance and be insured for at least £5 million. Most insurance companies automatically provide a minimum of £10 million cover. Employers Liability Insurance must cover all your members of staff in the UK.

Should your business not be a limited company, and you are the sole member of staff or your staff consists solely of close family members, you are not required to purchase ELCI. Limited companies with a sole employee, provided that the employee owns at least 50% or more of the shares in the company, are also exempt from compulsory ELCI.

Public Liability Insurance

Public Liability Insurance covers any awards of damages given to a member of the public following an injury or damage to their property caused by you, your staff or your business. It also offers cover against any related legal costs and expenses as well as hospital treatment costs (including ambulance costs) that the National Health Service might attempt to claim from you.

Premiums vary according to the type of business you run, turnover of the business and the number of employees you have.

Some professions, eg horse riding schools, are legally forced to hold public liability insurance. You are also likely to discover 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

In product liability insurance (PLI) terms, the definition of a product is any physical item that is sold or given away.

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

• your business' name is on the product - it was manufactured for your brand
• your company fixes, refurbishes or otherwise modifies it
• the product was imported from a country outside the E.E.C.
• you cannot clearly identify the manufacturer
• the manufacturer has gone out of business

Otherwise, liability lies with the manufacturer - or the processor in the case of the item being manufactured from parts made by multiple suppliers.

Property Owners Liability Insurance

Property owners' liability insurance enables you to pay any costs and damages given to a member of the public if they be injured following an accident on, or linked to, your premises. This could include the cost of treatment in hospital and ambulance charges claimed by the NHS, if somebody is awarded compensation for personal injury.

Generally, it's a good idea to make sure that property owners' liability is included in your business policy - you might find it included with  your contents insurance policy.

Professional Indemnity Insurance

If you are in the business of selling your skills or knowledge, you might want to think about purchasing professional indemnity insurance.

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

Most professionals carry professional indemnity cover. If you are an accountant, lawyer or financial adviser, then you must carry professional indemnity insurance. Professionals such as advertising and PR agencies, designers, consultants and architects often choose to take out such cover also.

Business Insurance

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