Liability Insurance for Small Business

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Liability Insurance for Small Business

Liability insurance for a small business provides an effective defence against some of the most serious financial risks it might face.

Finding the appropriate cover for your own enterprise, therefore, may involve an understanding of just what business liability insurance typically covers.

The principles

Liability arises from the concept that a business – just as an individual – owes a duty of care towards a wide range of people with which it comes into contact, consciously or by accident. These individuals may be your customers, your employees or even members of the public at large.

It might be useful to consider how liability insurance for business rises to meet these particular challenges:

Product liability

  • you owe your customers a duty of care to ensure that any products you sell or use in the services you provide are free of defects and work in the way they are intended;

  • even in the event of a manufacturer’s warranty, you may still be held liable for faulty products you provide – and if they are unsafe you may also face criminal charges;

Personal liability

  • it is not only in the products you supply, but also the services you provide to your customers for which you have a personal responsibility for avoiding errors, mistakes and accidents which might leave them with personal injuries or damage to their property;

  • personal liability insurance is designed to protect you and your business against such claims;

  • in certain forms of business – if you are a lawyer, accountant or architect, for example – your liability for acting at a level commensurate with your special qualifications and training might mean that you need a specialist type of cover, called professional liability insurance, against such liabilities;

Employers’ liability insurance

  • if you employ others in the running of your business, you not only have a duty of care towards their health and safety, but the law almost always insists that you have employers’ liability insurance to cover any claims for compensation they might make if they are injured or contract an illness or other medical condition whilst employed by you;

Public liability insurance

  • not only do you owe a particular duty of care towards your customers and any employees, you also have a general responsibility to act in a way which avoids injury to members of the public or damage to their property;

  • this duty is enshrined in English case law as the “good neighbour” principle, requiring you to take every reasonable step to ensure that your actions – or failure to take action – result in no injury or damage to the property of any other individual;

  • if you are considered to have been in breach of that duty of care, the injured member of the public may be awarded substantial damages by way of compensation;

  • business public liability insurance is designed to offer you indemnity against such claims.

Thus, certain elements of liability insurance for your small business might not only be a legal requirement, but without them your enterprise is at risk of substantial financial claims against it.