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Liability Insurance Experts

Liability insurance provides compensation payments where you (your business, employees or products) are deemed liable for third party property damage or personal injury claims. The financial impact of these claims (both defence costs and awarded payments) can be crippling, so it’s important to adequately protect your business.

Liability insurance is split into two sections: Public Liability and Product Liability. Below is a  summary of each, along with some claims examples and key tips to consider when taking out a liability policy.

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Public Liability

This provides cover for claims brought against your business for third party property damage or personal injury. The policy extends to all employees, directors and partners while they are conducting activities in the general course of business.

In addition to compensation payments, your liability insurance generally also covers reasonable legal expenses incurred.
 

Claims Examples

Who: Clothing store    

What happened: Heavy rain resulted in water leaking through the roof and onto the insured’s shop floor. A customer slipped on their way out of the shop and fractured their wrist.

Outcome: The insured’s liability policy responded, paying $35,000 for medical expenses and lost income.


Who: Electrician     

What happened: The insured was contracted to perform the electrical work for a new office fit-out. While running cables above the ceiling, they slipped and fell, damaging part of the floating ceiling and ripping down air conditioning ducts.  

Outcome: The insured’s liability policy responded, paying $11,000 to repair property damage.
  


Product Liability

Product Liability insurance provides cover for third party personal injury and / or property damage caused by your products. Cover includes allowance for compensation payments and legal defence costs.
 

Claims Examples

Who: Importer and Wholesaler of Solar Systems   

What happened: A solar inverter imported by the insured was faulty and caused a fire at a customers home. After investigation by the customer’s insurance company, it was found that the insured’s inverter was the cause of the fire. The customer’s insurance company brought legal action against the insured to recover the damages.  

Outcome: The insured’s liability policy responded, paying for investigation costs to determine fault. It was found that the insured’s product was the cause of the fire and a claim was settled for $88,000.


Who: Manufacturer of natural skin care products

What happened: The ingredients printed on the label of a body cream were incorrect. A customer who used the product broke out in a severe allergic reaction causing skin damage.   

Outcome: The insured’s liability policy responded, paying $8,000 in medical expenses.


Who: Restaurant 

What happened: A customer suffered food poisoning after eating at the insured’s restaurant. Medical tests show they had salmonella poisoning. The customer was a contractor and had to take 3 weeks off work while they recovered. During this period they were unable to earn an income.

Outcome: The insured’s liability insurer agreed to pay for 3 weeks lost income.
  


Tips

  • Disclose all business activities. If your activities change during the year, advise your insurance broker. Undisclosed activities can have a significant impact on claims.

  • Sales are a key factor in calculating premium. Make sure you disclose your correct sales volume, or claims payments may be effected. Every year at renewal, make sure you update your expected sales.

  • For insurance purposes, if you import any products into Australia, you are deemed to be the manufacturer. 
  • If you engage sub-contractors, find out how your liability policy responds to work they perform under your direction and also if they are injured on site.

  • Depending on your specific business, there may be special endorsements added to your insurance schedule. Make sure you read and understand these endorsements, as they do alter the cover offered by your policy. Some common endorsements restrict the type of work you can do, locations you can work at and enforce special conditions you need to meet for your cover to be valid.

  • Read the exclusions detailed in your policy wording! A few exclusions worth mentioning are faulty workmanship, product recall and contractual liability.  

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