Employers, Products and Public Liability Insurance

In the UK, as far as business insurance is concerned. You have two options. The first option is to take a policy out in respect of the covers that you are legally required to have. The second one is to add to these covers with others that a sensible and prudent business owner may need.

So, when we are talking liabilities, what is, and what is not, a legal requirement?

We first need to consider exactly what we mean by "liability". Think of it as a bit of a blame game. If someone drives in to your car, then you will blame them for the damage caused. This blame, in legal speak, is that they are liable for the damage, or injury, caused to you or your vehicle. Therefore, if you, in the course of your business cause any injury, illness, disease or damage, you can be held liable.

Of the three main types of liability insurance, only one of them is a legal requirement. As most of us in business know, this is for employers liability. The law of the land has had legislation in place, which is frequently updated, to protect employees since 1968.

So, you need to have it, but only if you have employees. This is where you need to exercise some care and caution. An employee is quite a wide definition. All of the commercial insurance companies in the UK that offer this cover will have, in their wordings, a definition of an employee. The definitions are usually very wide. If you get a friend or family member to help you out one night in the shop, when you are short staffed, they need to be covered under your EL cover. It is irrelevant whether they have a contract of employment, are paid via formal payroll or whether it is just for a few hours. They are effectively working under your direction and if injured, they can make a claim against you.

This is important, the claim from an injured employee is against the business. If a policy is in place to provide cover, this will "step in" to protect you. If you do not have cover, this does not mean that you don't pay. Your business could face financial ruin, just from the legal costs.

The other two types of cover are products and public. Product liability insurance is in respect of any injury, illness or disease caused to persons or damage caused to property, by products you supply, whether or not you are the manufacturers or not. Public liability is if you cause any of the events noted, effectively in the course of your business. ie the plumber who floods a house, the shop that has a wet and slippy floor or the IT contractor that damages a computer belonging to a third party.

These two are not legally required, but you could still face a civil law claim against you. For the overall cost of the cover compared to the potential claims cost, you are always better off taking out a policy.