Tourism Update spoke to Andre du Toit, Executive Head – New Business Development, of SATIB, who shared some valuable insights into liability cover.
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.
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 $10m. 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 to indemnify the insured for potential international award in US dollars or 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/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/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 of the nature of the business, there is a multitude of extensions that should be considered.
SATIB would recommend that operators consult with a specialised broker and discuss the needs of their specific company, and ensure that they have adequate liability cover in place to protect themselves.