Statutory liability, general liability, director’s officer’s liability, even professional indemnity: all of these protections must be updated, reviewed or established to stay in line with new legislation.
The recent Health and Safety in the Workplace Act is just one example of how business owners could be easily caught out by changes to the law.
Confusion, however, is a choice. You can make the decision to remain informed on what business liability insurance you need and how to ensure the best value for money when you invest in them. Read on to discover the most common mistakes people make with their business insurance––and how to ensure you don’t make them.
Statutory liability
Statutory liability is intended to protect you in the case of an accidental breach of New Zealand’s laws. One of the key mistakes made here, particularly under the new Health and Safety in the Workplace Act, is that people don’t insure their businesses enough to fully fund their defence.
The new Act stipulates that more people are now liable for prosecution, potentially increasing the costs of a legal defence. Companies, directors, executives, trustees, officers––all could now require legal representation and, therefore, must be covered by the amount stipulated in your insurance if you want to avoid having to pay extra out of pocket.
General liability
General liability gives you diverse cover that protects you from a multitude of different scenarios. It is probably one of the first policies that you will investigate, but it does have its limitations––and these limitations often catch businesses out.
For example, general liability tends not to cover professional mistakes that your employees make, or any deliberate damage caused by your workers, or any staff injuries. You can get specific cover for these circumstances, but you can’t rely on general liability to be a catch-all for absolutely everything that could go wrong.
You can’t rely on general liability to be a catch-all for absolutely everything that could go wrong.
The property being worked upon exclusion is a good example. This exclusion takes away cover for any damage you do for what you are working on and is particularly important for those in the trades. For example, an electrician rewiring a stove causes a fire, the stove is not covered as that is what he was working on but any further damage to the kitchen would be, as that is the resultant damage.
Directors and Officers Liability
If you’re worried about being personally sued in your role as the director of a company, then directors and officers liability is a great way to mitigate that risk. But all too often, people forget that it is a specific insurance designed to protect you with matters that relate to the management or stewardship of a company––and nothing else.
If you were being sued by an employee for discrimination of some description, then your directors liability insurance is likely to cover you. But if you gave a customer the wrong advice i.e. acting in a professional capacity rather than a management capacity, it may be a very different story.
Professional Indemnity
Mistakes happen, and professional indemnity helps cover the costs incurred by such errors. If you’re a consultant, you may give out the wrong advice by accident. If you’re an accountant, you might misinterpret a new or little known tax law. Essentially, if you provide services or advice to individuals or businesses, you should have professional indemnity protection.
If you provide services or advice to individuals or businesses, you should have professional indemnity protection.
Unlike some other types of insurance, professional indemnity cover sometimes includes a retroactive clause. That is, you can claim on an event that took place a specified amount of time before you took out the cover. This is also the topic of a common mistake: people tend to wait too long before they get their professional indemnity sorted. Sometimes errors take many months to surface—by which time your retroactive clause may no longer be applicable.
Kane Butler, Principal of BRAVEday, has some further advice:
“What people need to be wary of when accepting or signing terms of trade is that any limitation clauses do not void their insurance policies by being a ‘hold harmless’ agreement or negating the insurers right to subrogation.
“Signing either of these can instantly void a liability claim.”
Remember your terms of trade
One last note on liability insurance in general: you need to include them in your terms of trade.
If you are working with other companies, you need to discuss who takes responsibility for certain goods and services, and at what point; whose insurance policies take effect in case of an accident. If you work without this explicitly written out in your terms of trade, you can get into lengthy battles to determine who needs to pay out if an accident happens.
Save yourself the headache: weave your liability insurance directly into your terms of trade.
We hope this has helped you start down the road to true protection for yourself, your staff and your business.
For more information, check out our free ebook below!
