Liability Insurance Overview
Liability Insurance in South Africa can be explained as follows: South African law is basically divided into two distinct spheres, namely criminal and civil law. An action by a person can have both civil law and criminal law consequences, but the two fields have entirely different applications.
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).
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 persons 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 & Setting the Sum insured
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 are indeterminable – so, he higher your sum insured the better, partcularly when loss of life is involved.