Chapter 6- Liability Flashcards
What has to be accounted for in respect of liability to someone who suggests injury or loss
Negligence
If you are negligence what are you liable for under EL
Pay damages, costs and expenses to someone who suffers injury or loss
What does the Employers liability compulsory act 1969 mean
Employers must be insured against liability for bodily injury or disease sustained by their employees arising out of and in the course of their employment
What did the Employers liability compulsory amendment regulations 2008 do
No longer have to display EL cert only have an electronic copy
What is the limit of EL
It’s £5 million but most insurers give £10 million
What is the Employers Liability Tracing Office (ELTO)
ELTO members are required to supply policy data to the register and their ERN number to the Employers liability database
What do EL policies provide indemnity for
Legal liability for damages including claimants costs and defences
To pay out What are the 4 significant things for EL
Must be caused during the period of insurance
- Arising out of and in the course of their employment
- In connection with trade or business
- Occurring within certain territorial limits
What is vicarious liability in regards to EL
EL also applies where the actual act of negligence was also perpetrated by a fellow employee
Is employees property covered under EL?
No, only disease injury or death.
Property under PL
What is the definition of employee
Any person who is under a contract of service or apprenticeship
So can include direct employees, self employed, hired persons and students on work experience
Why is it important that the trade or business is fully disclosed on EL polices
To avoid problems with claims from work carried out that goes beyond the business stated in the schedule
What are the territorial limits for EL
GB
OR can be temporarily outside these limits (insurers will need to assess this risk)
What is the period of insurance for bodily injury or disease
Must be caused during the period of insurance
What are the two extensions to EL cover
- Defence costs and expenses- as well as paying compensation to the claimant can indemnify the policyholder too
- Additional persons insured
What are the 3 limitations to EL insurance
Some cover can be limited by:
- Restricting the definition of business
- By excluding certain kinds of work
- By excluding certain machines
What are most EL policies rated on?
Wages for different categories of job type. Usually estimated at the beginning of the insurance
Is claims for employees who are passengers covered under EL insurance
No, motor insurance
What does it mean that public liability is an ‘open’ policy
The scope of cover isn’t specified for example it is defined by the exclusion of specific perils
What is PL cover designed for
To compensate in respect of claims for legal liability from members of the public or companies who may suffer due to their negligence
What cover is provided for PL
Cover is provided for damages as well as costs and expenses incurred
What does PL provide indemnity for
Legal liability to third party damages in respect of bodily injury, disease or injury
Under PL policies what is meant by injury to persons
Bodily injury or death
How is loss of or damage to property covered under PL
Only covers the risk of physical damage to material damage or indirect economic loss, liability for loss of property is also covered
What is a pure financial loss under PL
Financial loss which a third party may be able to claim even the n the absence of injury to persons or damage to property
What are the 2 optional extensions to PL
- Tenants liability- loss or damage to rented premises
2. Defective premises- covered liability to defects in premises that have been owned or occupied
What are the 12 limitations to PL cover
- Injury to employee
- Property belonging to the insured
3, product liability
- Contractual liability
- Cost of rectifying defective work
- Professional negligence
- Deliberate acts
- Motor vehicles
- Vessels and craft
- Lifts, elevators and boilers
- War risks
- Radioactive contamination
What are the 4 typical hazards in respect of product liability
- Electrical appliances
- Food manufacturers
- Tyres
- Weed killers and fertilisers
What is the standard policy cover for product liability
Legal liability for bodily injury or property damage which during the period of insurance which arises out of goods or products manufactured
Does Product liability policies cover consequential losses
Only if these flow directly from loss or damage for which the insured is legally liable
What must occur during the period of insurance for product liability to pay the claim
The injury or damage
What are the 4 limitations to product liability cover
- Contractual liability- where the insured has entered into a specific contract with another party
2- damage to goods supplied- cost of recalling faulty product
- Faulty design or formula
- Unsuitability or failure to perform
Under directors and officers directors are to the following 7 things:
- Act within powers
- Promote the success of the company
- Exercise independent judgement
- Excercise reasonable care, skill and dilligence
- Avoid conflicts of interest
- Not accept benefits from third parties
- Declare an interest in any proposed transaction with the company
What did the companies act 1985 do for directors and officers
Imposed restrictions on the indemnity that could make to its directors
What does the companies act 2004 do in relation to directors and officers
Allows companies to assist their directors financially whilst ligation proceedings are going on.
Also persists then to indemnity their directors against certain liabilities to third parties
Under directors and officers policies what 6 things may liability arise from
- Negligence advice or misstatement
- Acts outside the company’s constitution
- Failure to disclose conflicting interests
- Errors of judgement
- Negligent supervision
- Imprudent investments
What are the two elements of standard policy cover for D&O policies
1- cover for the directors and officers in their personal capacity when they are unable to claim from the company
2- cover to protect the company in circumstances where it is permitted to indemnify the directors or officers such as legal costs
What is the basis of cover under D&O policies
It’s a claims made policy- covers all claims notified to the insurer or the insured during the period of insurance no matter when the event giving rise to the loss occurred
What is the policy limit for D&O policies
It’s in the ‘annual aggregate’ meaning only one single limit for all claims against all the insureds during the policy year
What are the 10 main exclusions for D&O policies
- Prior notification
- Prior and pending litigation
- A jurisdiction clause (may exclude actions in the USA or Canada)
- Bodily injury and property damage
- Pollution and contamination
- Claims based upon improper personal gain by a director
- Fraud or dishonesty
- Insurerd v insured
- Breach of professional indemnity
- Fines, penalties and punitive charges
What is professional indemnity insurance
Protects a professional person against claims which might be made alleging that injury or loss resulted from their actions or advice
What are 3 examples of PI risks
And insurance broker
An investment consultant
A surveyor
What is the standard policy cover for PI
Covers liability for members of a profession for injury, damage or financial loss to client or the public as a result of a breach of their professional duty
What liability policies are on a claims occurring basis meaning that so long as the events giving rise to a claim happens during the period of insurance the policy will respond even when the claim is notified after the policy had expired
EL
PL
Product
What liability policies are on a claims made basis
Professional indemnity
D&o
What are the 6 optional extensions for PI policies
- Continuation of cover beyond cancellation.
- Liability breach of warranty
- Liability for financial loss caused by loss of documents
- Collateral warranties
- Cover for any other person or form acting jointly with the insured
6 fidelity guarantee
What is excluded under PI
Dishonesty from the insured
How is the premium for PI calculated
Rates on the gross fees, gross revenue or the amount or indemnity
What are the 2 types of Trustee insurance
Person fund trustees
Charity trustees
What is a pension fund trustee
designed to cover internal maladministration or a pension fund resulting in court against trustees, losses to the pension fund plus defence costs
What basis is cover in regards to pension fund trustees
Claims made basis
What is the standard policy cover for trustee indemnity insurance
Cover against the risk of personal liability for the commission of a wrongful act
What is a charity trustee
Someone who has the power to insure any property that is subject to the trust against risks or loss or damage due to any event
What is trustee indemnity insurance
Covers risk against personal liability arising from a breach of trust
What are the 3 limitations to trustee indemnity
- Fines
- Costs unsuccessfully defending criminal prosecutions arising out of fraud
- Liabilities to the charity arising from conduct which the trustee knew
What is an extended warranty
Personal insurance offers to purchasers of consumer durables
What is the standard policy cover for extended warranties
Is for free repairs following electrical an mechanical defects for up to 5 years
Usually markets by retailers
Who underwrites extended warranty policies
An authorised insurance company or Lloyd’s syndicate for a typical sum insured of £2,500 per household
What are the 4 limitations to extended warranties
- Failure to comply with manufacturers instructions
- Risks normally covered under a household contents policy
- War
- Costs of repairs to bulbs, aerials, external wires, knobs, handles
What is vicarious liability?
Vicarious liability means that in law an employer is liable for the negligence of employees arising in the course of their employment
A butcher wishes to arrange protection against claims made by customers who become ill as a result of eating their meat pies. Which insurance policy will meet their needs?
A) an employers liability policy
B) a product liability policy
C) a personal accident and sickness policy
D) a professional indemnity policy
B
Remember that product liability insurance is required by all sellers of goods, whether they are manufacturers, intermediaries or retailers. In this example it appears that the butcher is the manufacturer, as well as the retailer or the meat pies
Why do you think extended warranty insurance is needed if the insured already holds household contents insurance?
Household policies exclude wear and tear and mechanical and electrical breakdown
What is the legislation by which employers liability insurance is made compulsory and the minimum limit of indemnity permitted?
The employers liability (compulsory Insurance) act 1968 and the employers liability (compulsory insurance) regulations act 1998. The minimum limit is £5million
What cover is given under an employers liability policy?
Legal liability for damages (plus costs and expenses incurred) if any employee sustains bodily injury, disease, il was or death arising out of and in the course of employment by the insured.
How may cover under an employers liability policy be limited?
An employers liability policy may be limited by;
- restricting the definition of ‘business’
- excluding certain kinds of work
- excluding certain machines and/or processes
What monetary limit do most insurers impose on employers liability policy?
£10 million
In respect of public liability insurance, what are the definitions of ‘injury’ and ‘damage’?
‘Injury’ means bodily injury to or illness, disease or death of any person.
‘Damage’ means loss of or physical damage to material property
What are the two most common optional extensions to a public liability policy?
Tenants liability and defective premises are the two most common extensions
What is the basic purpose of product liability insurance?
Product liability insurance cover legal liability for bodily injury or property damage caused by products or goods.
What is the purpose of directors and officers insurance?
Directors and officers insurance is designed to cover the legal liability of individuals with a company who may be personally liable for breaches of duty and so incur financial liabilities.
What is the purpose of professional indemnity insurance?
Professional indemnity insurance covers the legal liability of members of the professions for injury, damage or financial loss to clients/the public as a result of breach of professional duty or negligent acts, errors or omissions
What cover is provided by an extended warranty policy?
An extended warranty policy will cover free repairs following electrical and mechanical defects for a period of up to 5 years
