Knowing when to claim liability insurance

According to various facts and figures, society is becoming more litigious. People, groups and organisations tend to be more willing to go to court over a perceived injustice because doing so carries little financial penalty. Many solicitors operate on a no-win, no-fee basis and most companies trade with sufficient indemnity.

Public liability insurance, for example, provides a degree of protection for businesses that might have to face a claim made by a member of the public. The following article explores how such claims work in practice.

Public liability insurance is a necessary expense for most if not all types of business. Even the self-employed freelance web designer working from a home office can be subject to a public liability claim. In most cases, however, litigation is aimed at firms that have some form of public presence. Builders, architects, landscape gardeners, delivery drivers and bakers are just some of the many types of businesses that might be affected by a liability claim at some stage.

Companies that have public liability insurance can usually cover claims up to £2 million in value (some trades attract lower or higher limits). Obviously, the extent to which a firm is liable – and the amount of money it may have to pay the claimant(s) – depends very much on the nature of the accident or wrongdoing. If, for example, a baker burns the finger of a customer, he or she may be subject to a personal injury claim of several thousand pounds or less. If an architect’s building topples down onto several unsuspecting members of the public due to poor design, the claim is clearly likely to be far more substantial.

In the majority of cases, a liability claim is brought against a firm for personal injury or property damage. The claimant would in most cases contact a solicitor before any kind of claim is made. At this point, the solicitor may get in touch with the defendant to discuss the possibility of a claim being brought. However, it is just as likely that an application to claim will be filed in court. Either way, the action would be handled in the same way as any other type of claim of this nature.

The only difference is that the defendant has public liability insurance. Solicitors acting on behalf of the defendant may choose to defend the claim with rigour or may settle out of court for a sum that is likely to be less than the figure awarded in court. Regardless as to how the claim proceeds at this point, unless it is rejected by the court, the claimant will be paid compensation, the cost of which would be absorbed by the defendant’s insurer less any policy excess or exclusions.