Liability Insurance

A common mistake made by some business owners, is to only concentrate on the insurance of their own assets (sometimes called first party insurance).While securing comprehensive insurance cover on your assets is key, transferring the insurable risk exposure you have as a business to third parties, is critically important to ensure business continuation. The main types of standard commercial liability are: General & Tenants Liability, Product-Defective Workmanship Liability and Employers Liability.

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Overview

General & Tenants Liability insurance generally relates to insured general exposure to third parties, arising from your daily activities as a business owner, including liability a tenant of a building or as a property owner.

Products-Defective Workmanship Liability insurance generally relates to insured liability arising from products supplied or manufactured, while Defective Workmanship Liability relates to insured liability arising from defective work, after it has been handed over to the customer. 

It is important to note that cover is not designed to cover the product or work itself, but rather the consequent legal liability that flows from the insured products or the insured Defective Workmanship.

Employers Liability cover generally relates to insured legal liability arising from employees suing you, as the employer, for occupational injury or death, in the course of their employment  

Criminal vs. Civil Law

A crime is a wrong that is prejudicial to public interest and offenders are prosecuted by the State for an offence that contravenes either the common law or a specific statute. Civil law on the other hand is concerned with the protection of the legal rights of the individual against other individuals and the State. Civil actions can be framed in various forms, the two most common causes of action being contractual and delictual (negligence).

Delictual Liability

It is delictual liability that represents the largest exposure for any organisation. In essence, delictual liability is concerned with damages suffered by a person as a result of a wrongful act or omission of another for which that person is entitled to compensation in terms of our common law. Essentially most liability insurance policies only cover delictual liabilities.

In the past, South African courts, when compared to courts in western countries, have been conservative in their awards of damages. This trend has, however, come to an end with courts regularly awarding damages amounting to millions of rands for injuries/damages sustained from a single incident.

South African Law concerning Liability

South African law does not prescribe a duty to act on any person. However, if a person is in control of a thing or situation that is potentially dangerous and he does nothing to prevent loss to a third parties person or property he can then be held liable for that person’s damages. Thus the owner of an industrial premises can be said to be in control of a thing or situation (including the acts of employees within the scope of their employment) and consequently the law prescribes a positive duty to act on that owner by taking all reasonable steps to avoid injury or damage to a third parties person or property.

Liability Insurance

Liability insurance is designed to cater for the invariably catastrophic financial implications of such eventualities when they do occur. For example, the liability of a tenant / property owner with regard to fire negligently spreading from his premises to third parties surrounding property causing damage worth millions of Rands (apart from the debilitating financial implications caused by death/injury to persons).

Cognisance of these facts should be taken into account when setting the sum insured together with the nature of the risk in relation to damage to third parties property, including the exposure of injury/death to third party persons. It is impossible to measure the extent of any possible loss given that our legal system has the difficult task of attaching financial value to human life/injury and third parties property. It is very much a case of the higher the sum insured the better and in most cases the determining factor in selecting a sum insured is in fact the affordability of the insurance premium as awards made by courts can range from R500 000 to R20 000 000 (and higher).

Liability Insurance Essential for any Business

One thing is certain, all businesses are exposed to the public at large in some way or another and thus liability cover is essential for any business operating in South Africa. The above principles apply to all forms of liability insurance in South Africa, including those listed in the Product Profile.

Packaged Commercial Liability

Commercial short term insurance policies offer a limited amount of cover options under their package policy offerings, namely:

  • General and Tenants Liability, this essentially looks to cover the general liability of the business and tenant liability, where applicable
  • Products Liability, this essentially looks to cover insured legal liability arising out of products sold, manufactured or supplied. The cover is limited. A specialized product liability policy offers significantly wider cover
  • Defective Workmanship, this essentially looks to cover insured legal liability arising of poor or faulty workmanship, after the work is handed over. This cover is often incorporated with Product Liability
  • Employers Liability, this essentially looks to cover insured legal liability arising from employees suing the business for injury or death in the scope of their employment
  • Umbrella-Top Up-Broadform, this essentially looks to extend the underlying sum insured on a top up basis and extend underlying cover slightly, usually through another insurer

Contact Chadwicks Risk & Insurance brokers today for comprehensive liability insurance in South Africa.

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