Practical public liability

Public and product liability insurance is so easily neglected, yet so vitally important, a cornerstone of every nascent enterprise. If you get it wrong, it can sink your business without a trace. Moreland Insurance Director, Maurice Logie reports

In the UK, motor and employer’s liability are the two compulsory forms of business insurance. Employer’s liability is required to protect an employer’s legal liability for injury to employees. Public and product liability is particularly relevant to the franchise sector, where franchisors or Master Franchise Owners may have insurances in place that franchise owners might reasonably assume provide cover for them as well – in a world where people will sue at the drop of a hat, it is necessary cover.

Essentially, public liability insurance protects you for claims against your business. Premiums will depend on the type of business, your turnover and the number of employees. The problem is working out what level of protection you think you need. The key is not to underestimate – councils and landlords in shopping centres and malls will typically insist on £5 million – and sometimes up to £10 million – indemnity limits, regardless of the size of the business or the likely risks.

Franchise owners need a policy that guards against safety claims, manufacturing quality, spoilage and indemnity costs such as medical bills. Product liability is designed to cover you against unforeseen circumstances, not against making an inferior product or supplying bad services.

The point is that franchise owners, especially in the earlier part of their enterprise, have so many things to think about that going through the necessary small print of countless different types of policies may not be high on their list of priorities.

This is where Moreland comes in. We can examine your business impartially – and at no cost – and identify and tailor the extensions that may be necessary to an encompassing policy held by the franchisor or Master Franchise Owner. Here are a few examples of businesses that were not covered by the right policy:

General Liability
The insured was cutting down a tree on a rural block that accidentally fell on a neighbour’s fence round an empty paddock. The insured pulled up the wires but failed to attach them to a post. The following week, the neighbour put deer into the paddock, which immediately escaped into the forest beyond. The costs were claimed for the lost deer by the farmer.

Product Liability
The insured supplied an oil filter that had been manufactured with an unknown fault. The opening on the bottom was slightly off centre. The filter was installed in the vehicle but could not seal correctly. The engine of the claimant’s vehicle soon seized due to lack of oil. The cost of the product (filter) was not covered but the resultant damage was.

Service and Repair
A contractor was undertaking gas cutting work to prepare an area on an excavator for repair. Sparks from pieces of molten metal settled on pine needles on a small platform on the excavator, which started a fire. Damage occurred to the excavator, which required repairs, but there was no damage to the boom on which the contractor was working. Other losses included the cost of hire of replacement equipment.

Underground Services
A digger on a building site cut an unidentified power cable. This cut power to a petrol station across the road. The costs incurred in repairing the cable would be covered but the consequent losses at the petrol station would be considered as too remote to the loss.

In summary, the demand for correct Public Liability Cover that most franchise agreements request is well made. I would recommend however that franchisors go further and make sure that a suitably qualified and experienced insurance broker carries out the process of handling this matter.