Risks Covered
Public liability refers to liability incurred to members of the public by reason of negligence or breach of duty in the context of accidental events and occurrences.
Public liability insurance policies generally covers accidental loss, damage and injury, and related costs and expenses. It is typically taken out by businesses in respect of the risks that the members of the public will take proceedings and recover damages in consequence of accidents arising in the course of business.
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Public liability arises classically from claims in negligence, nuisance and so-called occupiers liability. The classic public liability accident arises on the business premises. Liability in nuisance and occupier’s liability usually arise from states of affair. Both nuisance and occupier’s liability in their modern formulation is largely based on findings of negligence.
Accidental Loss
Public liability cover usually covers liability which the insured may become liable to pay as damages, for accidental personal injury or illness to persons, damage to property, costs and expenses involved in recovery against the insured or incurred with the consent of the insurer in relation to the claim.
The intention is to cover unintentional and unexpected events. Liability in respect of deliberate and wilful acts is not usually covered, either under the terms of the policy or as a matter of first principles.
Intentional acts by employees within the scope of vicarious liability may be interpreted as being within the terms of cover if they are accidental and non-negligent on the part of the employer. The position will be different if the conduct was authorised or if the insured did nothing to prevent it.
The concept of an accident can be difficult to define. It may depend upon circumstances. Generally, it is an unexpected or unforeseen, at least in the immediate sense. It may be an unusual consequence of a known cause or it may be something sometimes arises in the normal course of thing. It may, but need not necessarily arise, as a result of the negligence or carelessness of a third party.
Liability to Others
Liability insurance is based on the liability on the part of an insured person concerned to compensate a third-party who suffers loss or damage, which will generally arise from negligence on his part or on the part of another for whom he is responsible. In some cases, it may arise without negligence, in the case of a strict liability tort.
Policies generally cover and provide indemnity in respect of loss arising from personal injury or damage. The law of negligence determines the extent to which a person is liable for the consequences of an act, action or omission. The principles of negligence, remoteness and causations are discussed in other sections.
Policies may insure a person against his own personal accidents. However, this differs from liability and public liability insurance, in that the person who potentially suffers the accident insures the risk himself. In contrast, liability insurance is founded on indemnifying the insured’s legal liability to the injured party.
Costs
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Indemnity cover usually includes the costs recovered against the insured by the third-party claimant and costs incurred by the insured with the consent of the insured. Generally, the insurer takes over the running of the case. This is not champerty. Costs liability may arise to the claimant if the proceedings are unsuccessful. This is generally covered under the scope of the policy. Such costs are indemnified on a party and party basis.
For VAT purposes, legal costs are notionally provided by the insurer’s solicitor to the insured. Provided that the insured does so in the context of a taxable business, recovery may be allowed for VAT as an input. The insurer will seek to obtain the benefit of the recovery of VAT in respect of the services provided under the terms of the policy.
Exclusions
Public liability policies do not generally cover liability to employees or trainees in the course of employment. This risk should be the subject of separate employers liability cover.
The cover does not usually extend to use of a vehicle in circumstances within the scope of compulsory insurance under the Road Traffic Acts. See the section on Road Traffic Act insurance issues. Issues of overlap may arise. Policies do not extend to the loss of the insured’s own property. This should be a subject of separate material damage and theft policy.
Public liability policies do not generally cover liability arising for breach of contract. They are generally limited to liability for tort/civil wrongs, causing personal injury or property damage. The fact that there may be a concurrent liability for both breach of contract and civil liability, does not exclude cover. It is possible in principle for policies to cover contractual liability in certain circumstances.
Environmental Liability
Insurance policies commonly exclude liability for pollution or contamination, other than caused by a sudden, unidentified or unexpected incident arising during the period of cover. The objective is to exclude liability for gradual or historical pollution.
A new and potentially onerous type of liability arises from environmental damage. Most public liability policies do not cover environmental damages. Damage from pollution and contamination, whether gradual or by reason of distinct incidents, are generally excluded from public liability policies.
Environmental liability policies may be contracted. Because of the long nature of liability and the changing terms of the law, such insurance is likely to be expensive, if it is available at all.
Unauthorised Acts of Employees
The courts have tended to hold that an employee is acting in the course of his employment, even though his actions are outside what the employer allows. This may be so, even where the employer expressly prohibits particular actions or behaviour concerned. The wrongful act may nonetheless be within the scope of employment.
An employer may be liable for acts which he has not authorised if they are connected with or within the scope of employment. The Courts have tended to expand the principle in aid of third parties who have suffered injuries. An employer may be vicariously liable for assault committed by an employee in the course of employment. The employer may be independently liable for failures to control, or to have systems to control its employees.
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Some class of civil wrongs may be incapable of insurance cover, for public policy reasons. However, liability cover may be available for the employer’s potential vicarious liability, provided that the employer’s involvement is unintentional and it does not assist, participate or condone the incidents and actions which constitute the tort
Scope of Cover
Public liability is most commonly incurred for personal injury and consequential financial loss. It may be incurred for pure economic loss, in the cases where it is recoverable under the law of negligence. Liability for property loss will commonly arise alone, or in conjunction with a claim for personal injuries. Pure financial loss is more commonly covered by professional indemnity policies.
The terms of the public liability policies will vary. They generally indemnify the insured against legal liability to pay compensation for bodily injury, illness or damage, incurred by the insured or his employee. In wider terms, they may indemnify the insured in respect of liabilities to a third party.
The policy will indemnify the insured against liability for costs recovered or incurred against the insured or incurred by the insured with the insurer’s consent in defending the claims.
Common Exclusions
Public liability policies will generally exclude liability to employees. They should be the subject of a separate employers liability policy. Liability to persons who are in fact employees, but which arise outside the course of employment may be covered. Difficult questions can arise in relation to whether particular persons are employees or independent contractors at law. This will depend on the true nature of the relationship between them.
Public liability policies will not generally cover risks which are within the scope of motor insurance policies. It may cover unlicensed vehicles on the insured’s premises, which are not in a public place and are outside the scope of compulsory insurance. It may also cover loss arising to a third party’s motor vehicles.
Matters within the scope of a material damage policy will be excluded. Accordingly, fire and similar damage and destruction risks to buildings, are normally outside the scope of the policy. Loss or damage to property owned by the insured or being used by it, whether real or immovable property, is usually excluded. The exclusion will not usually apply to visitors, employees, directors, etc.
Public liability will not generally cover liability arising by contract. Liabilities freely undertaken are excluded. If the liability would also have arisen in tort, it may be covered. Where, however, a contractual and tort duty happens to coexist, such for example, where people are admitted to premises under the terms of a contract, cover is likely to apply.
Public liability includes the liability for fire spreading from one’s own premises to another. The duty may be owed to rescuers who come to extinguish the fire. It may also be owed to persons who come in response to an emergency.
Rylands v Fletcher provides strict liability for matters accumulated on land which cause damage when they escape. Generally, an element of negligence would be involved. There must be a non-natural use of the premises concerned.
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