Liability policies are those that will indemnify the insured should they be found legally liable/ negligent for damage or injury to third party property or person.
Like it or not, incidents do occur – our crisis call unit alone receives close to 100 calls a week, two of which pose a severe threat capable of crippling the average business without specialist intervention or appropriate risk transfer.
Unlike a vehicle or a building that you can attach a value to, it is very difficult to quantify a potential liability exposure i.e. how much it will cost in the event of a claim. A few things are worth considering.
- Nett worth – Within the tourism and hospitality sector, you are often dealing with high nett worth individuals. The loss of earnings they suffer will be a part of your claim and this could translate into years of executive-level salaries. Future loss of earnings (factoring in annual inflationary increases and potential promotions) for the rest of that individual’s anticipated working career can amount to astronomical figures.
- Currency – add to the above a dollar or euro exchange factor and you are rapidly approaching catastrophic numbers that are likely to cripple any well-structured business.
- Legal costs – right or wrong just the defence costs can be exorbitant. Some cases drag on for a number of years; in fact few are settled in a matter of months.
- Medical/pain and suffering – no need to detail the impact of hospital bills on determining a quantum. In addition, pain and suffering for the rest of the injured party’s life! Someone needing nursing care would need two or three professionals to ensure 24-hour attention, 365 days a year.
Taking the above into consideration, quantums can quickly stretch over R100 million. Liabilities are therefore arguably the single biggest exposure that any company faces, particularly within our very specialised industry, which is becoming more and more litigious.
It is, therefore, crucial that companies carry sufficient liability cover and that the sum insured is sufficient in rands to indemnify the insured for potential International award in euros as an example. Each client, therefore, needs to factor in who their target market is in terms of age, nett worth and nationality when determining their indemnity limit (sum insured). In addition, the liability exposure to the tourism and hospitality sector is unique and therefore requires a specialised product. A few covers that should be considered:
- Legal defence costs – Is this cover included or has the limit been capped?
- European Community (EC) directive – critical should you do a lot of business with international booking agents.
- Jurisdiction – In which courts in the world will your policy respond?
- Territorial limits – In which countries are you or your subcontractors permitted to operate?
- Sub-contractors – Are you covered for the actions of your subcontractors? Most operators make use of sub-contractors for certain services e.g. transfers, day trips, activities, specialist skills etc. If you receive monies and bookings on behalf of these entities then you are potentially liable. It is vital that these individuals or companies have their own covers in place and that you check this upfront.
- Extensions – Depending on the nature of the business, there is a multitude of extensions that should be considered.
We would recommend that you consult with a specialised broker and discuss the needs of your specific company and ensure that you have adequate liability cover in place to protect yourself.