Liability Cover to Consider, if Operating at ‘Your Limit’

A tougher insurance market, coupled with a hardening attitude amongst insurers towards risk, are creating the conditions for an insurance product, with its roots in the 1960s, to attract greater levels of attention amongst those requiring public and products liability protection today.

The insurance product in question is Excess Liability Cover – a type of insurance that provides extra cover over that offered by the core (primary), public and products liability policy. Excess Liability Cover steps in when-ever the limits of the primary policy are exhausted by a claim, which can happen in the event of a very serious injury, large-claim litigation case or product liability crisis.

Some describe such cover as insurance for your liability insurance. It is particularly used by companies that have regular in-depth interaction with the public, which run commercial transport fleets, or which operate in high-risk industries prone to high injury rates. Those working with high net worth clients, or who carry out a lot of contractual work that requires a high level of liability protection, are other types of purchaser of Excess Liability Cover.

As the level of court awards in liability cases and the value of property have risen, insurers have been keener to share risk around the market. This has led to a reduction in some of the policy limits on primary liability policies and this downscaling of the protection available may require the insured to seek extra cover as a top-up. Additionally, some off-the-shelf protection only has a limit of £1m, but many contracts require the successful tenderer to have £5m protection, so a £4m gap needs to be bridged through an Excess Liability Cover policy. This can be a particularly useful policy as a one-off purchase that suits the requirements of an individual contract or tender process.

Brokers have access to Excess Liability Cover for public and product liability. This policy is designed to cover the potential impacts of a severe incident – a scenario which could result in a very large claim that severely impacts on a business’s finances or forces it to cease trading.

Such incidents are not exclusively risks incurred by large-turnover businesses. The number one source (1) of claims, to date, has proven to be heat work being carried out away from the business premises. Such claims can be significant in size, impacting on the bottom line of any business which does not have the Excess Liability Cover that can step in, if the limit on the primary policy is exceeded by the cost of the claim.

Businesses would be advised to consider the option of Excess Liability Cover if their policy limit is low and they are in a high-risk sector, or if they find their public and product liability limit reduced at renewal time. Those who also wish to quote for a contract but find themselves short on liability cover and thus unable to do so, should talk to a broker and discuss the Excess Liability Cover option, as a means to facilitate a tender submission for new work.

(1) Data from Chubb Insurance, a provider of Excess Liability Cover