The public which is the people of a country in every area or community is at risk from the activities of others within the same area. These could be negligent or fault from other activities that could cause harm, injury to others, or even death. Liability insurance is a system of risk financing to protect the policyholder from the risks of liabilities imposed by lawsuits and similar claims. Liability insurance is designed to offer specific protection and compensation for third-party victims.
Liability is the state of being legally responsible for something (Oxford Dictionary). Liability is something one owes to others. For instance, I am responsible for the welfare and protection of friends who visit me in my house. I will be held responsible if any bad incident happens to them while they are in my house. They are under my care. Again, we send our children to school and we leave them in the care of school authorities and teachers. We always hold school authorities and teachers responsible for injuries and death to our wards in school. This means school authorities owe us liability when our children are in their care.
Legal liability is the liability of a party imposed by a court for its actions or inactions, and for which the courts will award pecuniary damages to redress the injury. A legal wrong is either a violation of a person’s rights or the failure to perform a legal duty for a party.
Liability arises from three general classes of legal wrongs. These include crime, tort, and breach of contract. In a statutory liability, statutes are enacted to regulate the behaviour of society. Crime is wrong where a person intentionally inflicts injury or takes something from another, such as murder, robbery, rape, and theft. Torts are legal or civil wrongs committed against people or organizations, causing them a loss. Intentional torts are willful acts or the willful failure to act when required to do so that causes injury to someone else. Thus, crime is a specific type of intentional tort. Other types of intentional torts include slander and libel, patent infringement, and false imprisonment. Torts result either because the tortfeasor, who is the one who commits the tort, is either negligent in his duties that are imposed by law and not contract, causing someone else a loss, or causes a loss through his actions. For example, causing an auto accident, or failure to make a safe product are torts. Breach of contract is the lack of performance by a party to another to satisfy a contract that the parties agreed to.
Liability insurance falls within the law of delict (tort), i.e. the branch of law whereby the wrongdoer is legally obliged to compensate an aggrieved party for damages. Most Liability Policies intend to provide cover only in respect of Negligent acts.
Negligence is acting in a manner contrary to the manner of a reasonable person with similar experience/knowledge in the same/similar circumstances or the failure to act where there is a legal duty to act. The onus of proof is on who alleges. Legal doctrine is he who alleges must prove.
Negligence is the failure to exercise the required amount of care to prevent injury to others. For example, if you cause an accident that injures someone or damages their vehicle because you were driving at an unsafe speed, then you could be sued for negligence.
Most cases of negligence cannot be determined absolutely, for it depends on many factors. The main measure used to determine whether an act was negligent is to consider what a reasonably prudent person would do, given the age and knowledge of the tortfeasor, and other relevant factors.
Before a court will award damages, the presumed negligence must satisfy four (4) requirements:
- there must be a legal duty to perform or to use reasonable care;
- there must have been a failure to perform that duty;
- the plaintiff must have suffered an injury or a loss;
- and the negligent act must have been the proximate cause of the injury. The proximate cause is a cause that directly caused the loss or suffering so that if the proximate cause didn’t happen, then the harm would not have happened.
Liability insurance protects against losses arising from liability lawsuits. Liability insurance generally pays for the legal defense of the insured and any damages that are awarded by the court, up to the policy limit.
A Public Liability policy protects an Insured against his legal liability to third parties for damages in respect of accidental:
- (i) Death or bodily injury including illness
- (ii) Loss of or damage to tangible property
Occurring within the territorial limits and arising in the course of or in connection with the insured’s business.
For a liability claim to succeed the claimant must prove voluntary conduct which is:
– Unlawful (wrongful). Wrongfulness is judged according to the legal convictions of the community
– Fault in the form of negligence (act or omission).
The wrongful negligent conduct must cause the damage. There should be bodily injury and loss of or damage to tangible property which is assessable in money terms.
Public Liability Insurance covers your business from claims made by any third party for compensation of an injury or damage to their property as a result of your business activities. So to ensure your business is adequately covered to cover the costs of a claim where you are found negligent or to defend such claim, you should consider the following examples;
- A customer trips or falls in your showroom or retail store
- One of your employees reverses into a customer’s vehicle
- A customer’s car is damaged at your auto shop
- A customer gets injured by your manufacturing activity at your premises.
- A crane falls onto a vehicle and injures the passengers
- A customer trips over a step as they leave your office
In essence, a public liability claim can be made against a business if a customer or member of the public is injured/die in an unsafe environment or their property was damaged. The list of potential claims against a company that interacts with the public is endless and can lead to significant financial and reputational losses.
Consultants who work from home, contractors and tradespeople, businesses that have physical premises, and any company that interacts with customers or members of the public needs Public Liability Insurance. Whether you are self-employed or have 1000 employees, Public Liability Insurance covers you against injury, death, or damage to property to others due to negligence caused by your business.
The new Insurance Act 2021, Act 1061, section 214 and 215 makes it compulsory for businesses to have an insurance contract that shall provide indemnity for the insured person against the liability of the person to another person for bodily injury or property damage that occurs during the policy term that arises out of or in connection with the business activity or operations of the insured: and the legal and other costs connected with investigating, defending and settling a claim in relation to the liability.
If you don’t care so much about your property to insure them, you must care about injury/death to other members of the public and damage to their properties as a result of your business activity.
Written by: Justice Peprah AGYEI.
The writer is a staff of the National Insurance Commission. He is also the Leading Managing Partner of Jusbel Risk Consult limited. He is a Chartered Insurer and an Associate of the Chartered Insurance Institute of United Kingdom and also Ghana (ACII-UK, ACIIG), and holds MPhil in Enterprise Risk Management and Business Consulting from Kwame Nkrumah University of Science and Technology. Attained Bachelor’s degree from University of Ghana, Legon and have Applied Insurance studies, Diploma and Advanced Diploma (AAIS & AIS) from Ghana Insurance College / Malta Insurance Training Institute.
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Liability Insurance policy document
Insurance Advisor: https://insuranceadviser.net/why-public-and-product-liability-insurance-important-businesses#:~:text=Public%20liability%20insurance%20protects%20your,due%20to%20your%20business%20activities.