Small business owners would be forgiven for thinking that they’re covered by their public liability and/or occupiers’ liability insurance when it comes to protecting themselves against personal injury (PI) claims. But increasingly, companies are finding that they’re not as protected as they might think and are exposed to claims because of something known as the ‘insurance gap’.
To find out if your company is at risk, you can ask a few simple questions. Do you have public liability or occupiers’ insurance cover for your business? Do you know what the excess is on that cover? Clearly a company’s excess will depend on the type of business it is, the number of employees and the risks faced by your employees and customers in running the business.
It’s important to know the excess, of course, because if a claim against the company is successful that is the amount that will come off the profit or bottom line.
What’s your cover?
The next question you need to ask is which types of claim your public liability insurance covers? Does it cover all types of personal injury claims? And what about your sub-contractors and other self-employed people that carry out work for you? If you have a business that is partly office-based, does the policy only cover the people in the office or does it cover those on the road or at different sites?
It may be that you’re insured in general but not actually for the claim you receive. Let’s look at an example. A courier despatch firm receives a claim from one of its couriers, who had had an accident moving some goods at one of its customer’s sites. The company’s couriers deliver to over 1,000 sites and risk assessments hadn’t been completed for any one of them. The courier company assumed that it was covered because its couriers are self-employed. However, the contract of service stated that the couriers were responsible for everything except health and safety, which implies that the company is responsible. As it turns out the health and safety insurance only covered those based in the office and as a result the courier company is liable.
This is the insurance gap at work. It’s easy to see how companies can be impacted.
But the insurance gap doesn’t stop there. Even when your claim may be over your excess and is covered by your policy, insurers can refuse to cover you if they feel that you failed to tell them something important – known as ‘material non-disclosure’. It doesn’t always have to be something relevant to the claim either. An insurer refused to cover a company against a claim because the owner of the business failed to inform them that he’d appointed his wife as a director. While it’s irrelevant to the claim, it’s enough to prevent the company from being covered.
So how do you protect yourself against the insurance gap? While it’s not possible to totally mitigate claims against your company, there is action that you can take to lessen the impact of claims against you.
- Employees: Are all your workers just employees or are they self-employed, independent contractors? If they are employees, you have a duty of care towards them and you must have various procedures in place to protect them. If they’re subcontractors, you need a contract for services that make it expressly clear where their responsibilities lie. Get it checked.
- Accident books and risk assessments: These are vital for documenting processes and incidents and are often used in legal proceedings in defence of claims. If you have more than five employees you’ll need to have completed risk assessments for employees undertaking manual handling. If someone has an accident, even if it is not your fault, prepare an accident report. This may help you to defend the claim.
Despite best efforts, personal injury claims do occur. Since the claim will include the injury and crucially, the special or specific losses such as loss of earnings, medication and travel expenses, these losses can be substantial. When faced with a PI claim and the insurance gap what should you do?
- Argue your case. Keep in mind that it’s your insurance policy. Talk to your insurer and state your case. Sometimes, they will change their mind about whether to support and cover you.
- Do your due diligence. Check who the claim is from – are they who they say they are? Remember they have three years to bring a case to court.
- Query the accident circumstances. The claimant has to prove his case on a balance of probabilities. If it sounds unbelievable, it probably didn’t happen. Take the case of the landlord sued by his tenant who had injured his back when, after lighting the oven, it exploded. Turns out the oven was electric and not gas.
- Do the injuries match the circumstances? Take the case where a tenant claimed that damp and mould at the property had caused him injuries. Those injuries turned out to be a ruptured spleen and not respiratory issues you’d expect.
- Beware Pre Action Disclosure (PAD) applications. If you ignore them and don’t respond, the court can decide that you have failed to provide evidence and can make an order that you do so and pay costs.
If you’re unable to resolve the PI claim and your insurance company isn’t agreeing to protect you, then you can escalate the circumstances to the Financial (formerly Insurance) Ombudsman – it is slow but it works sometimes. In the meantime, ensure you get advice from a solicitor.
Failing to deal with the insurance gap is a false economy – dealing with it early can cost companies less later on. Find out your excess and make sure you are covered for all the possible risks to your business. Speak to your insurer before any claim hits you and you fall foul of the insurance gap.
Ashley Singer is head of the clinical negligence & personal injury team at SAS Daniels.