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What is Liability Insurance?

Liability insurance is insurance that provides financial cover for situations where the insured becomes liable for costs or legal fees due to damage to a third party’s property, third-party injuries, or fatalities.  Liability insurance can sometimes cover instances of malpractice or negligence, depending on your insurance provider. This part of your risk management system is essential no matter what size your company is.

Any industries where third parties are involved in processes, activities, or the running of the business will need public liability insurance. Understanding who the third-party is is simple. The insured (your company or business) is the first party. The second party is your business insurance provider. A third party will be anyone issuing a claim against your company. Examples of third parties are contractors, engineers, guests, or customers.

In the context of business, Liability Insurance protects the insured company from the risk of liabilities that result in lawsuits and claims. The insurance provider offers cover within parameters to pay for such liability costs and claims. These costs usually go to a fourth party, not the third party itself (for example, the hospital or the repairman).

Insurance these days takes on so many forms. Understanding the type of insurance your company needs and how it functions can be invaluable. Here are the facts about liability insurance to make navigating your company’s risk management process easier.

When is Liability Insurance Useful to My Company?

When a third party holds your business responsible for losses or injuries that occurred on your premises, involved your fleet, or was connected somehow with your business, liability insurance comes into play. You may become liable for damages or may be taken to court. In either situation, liability insurance is made to cover you.

Any business that makes contact with the public needs public liability insurance. You may think the chance of a liability case being brought against your company is low. In truth an accident as small as someone slipping and falling while on your premises can impact you financially and lead to a liability case. Your company can be held liable for incidents on your premises or connected to your business operations. It can also be held liable for the actions of its employees, partners, directors, principals, and any member of the company.

What Kinds of Liability Insurance are There in South Africa?

Public Liability Insurance

Not all liability cover is the same. Public Liability Insurance is basically third-party insurance for damages, losses, injuries, or fatalities your company is liable for that affect members of the public, customers, or visitors to your business.

This kind of liability insurance is considered a base minimum for companies who are in contact with the public like retail stores or even a karate dojo. Some companies, however, will need more than just public liability insurance as their risk profile is more extensive.

General Liability Insurance

For companies that need a more comprehensive solution, general liability cover as part of their corporate insurance portfolio is a good option. General liability insurance, depending on the insurance provider, usually covers things like defective products, employee injuries, and a larger range of third parties like vendors and suppliers. General Liability Insurance usually costs more than Public Liability Insurance but is the preferred choice for businesses because it offers a larger scope of cover.

D&O Liability Insurance (Directors and Officers Liability Cover)

Directors and Officers liability provides protection for instances where directors or officers in a company are held liable for acts of negligence, omissions, misleading statements, and similar cases that result in lawsuits against the company. Instances can include failure to follow the law, defamation by a board member, and improper dispersal of funds.

Typically, the amount is paid out to the company to cover the defence costs or as a reimbursement for losses to the company. Usually D&O liability cover does not protect Directors and Officers against intentional illegal acts.

E&O Liability Insurance (Errors and Omission or Malpractice Insurance) 

Malpractice Liability Insurance offers cover for people who are in positions where they give advice, offer solutions, and serve others with educated recommendations. Malpractice liability cover will protect the insured when they have made a mistake or error, or when they have failed to do something they should have.

The main difference between E&O and D&O Insurance is the type of company that will benefit from each and the industry each type of insurance caters for.

Employer’s Liability Insurance (EPLI)

EPLI is not the same as D&O, E&O or Public Liability Insurance. Employer’s Liability Insurance protects employers from claims against them made by their employees, staff, or workers. The cases brought against the employer are typically where the employee claims their legal rights have been violated.

Instances can include discrimination, wrongful termination, sexual harassment, infliction of emotional distress, inappropriate discipline or demotion, retaliation, and invasion of privacy. Often employees may also make cases against their employer when they feel there has been a breach of contract. Employer’s Liability Insurance is there to help cover the financial costs of these law cases.

Third-Party Vehicle Insurance

Simply put, Vehicle Liability Insurance is insurance that covers the insured should the company car or a car from the company fleet be in an accident or cause damage, injury, or fatalities to a third party. This kind of vehicle insurance is considered the most basic cover available and is obligatory by South African law.

To mitigate liability risks on a broad scale, covering every possible risk and eventuality, a company can benefit from partnering with an insurance provider that understands the ins-and-outs of business risks. Find out just how affordable liability insurance can be for your company. You can get a Business Insurance quote today and protect your business from liability risks by clicking HERE

DISCLAIMER: The information provided in this article is meant for informational purposes only and should not be construed as legal, medical, or financial advice. Facts stated in this article are correct at the time it has been published.

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