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What is Public Liability Insurance And Should Your Business Get It?
Imagine you are running a physical company. Someone slips and falls on a patch of wet floor in your premises, suffering injuries. Is your business at fault? Are you required to pay compensation to the injured party? Does it matter if your company was not responsible for causing the floor to be wet?
Scenarios like these form the basis of public liability.
What is public liability?
In the course of doing business, there is always the unfortunate risk that harm will come to others, in terms of either bodily damage or damage to property. When this happens, liability arises and the party at fault will be expected to pay compensation to the injured party.
It is possible for public liability to be incurred in contract law through a breach of contract terms, especially terms which are implied through statute. But the most common instances of public liability claims are through tort, especially for negligence.
The entire body of common law concerning negligence is both deep and nuanced, but generally speaking, if one party owes another a duty of care, did not perform this duty adequately enough and subsequently caused harm to be done to the latter party, then the former is said to be negligent.
So in our example above, a company could be deemed to owe people in its premises a duty of care not to expose them to undue danger, and should have taken reasonable steps to ensure that the floors are safe to walk on. As such, liability might be incurred by the company.
But what if the company had already decreed that steps be taken to ensure its premises are safe, and it was the negligence of the employees for not having taken those steps properly?
No dice, chief. Vicarious liability can be imposed, which means an employer is liable for the actions (or lack thereof) of an employee. There are specific conditions that must be fulfilled, such as whether the employee’s tortfeasance is sufficiently connected enough to his terms of employment (was what the employee did or didn’t do relevant to his job?). But as a whole, one can see the reasoning behind vicarious liability. Employees are often not financially well-off, and suing them personally might not yield sufficient compensation. More importantly, there would be plenty of jobs that people would not be willing to take on if it meant that they could be easily sued for money. As a matter of public policy, it is more practical to make employers liable and for them to take their own initiative in ensuring that their employees carry out their duties.
Public liability claims increasing
The law concerning public liability and negligence might not sound very agreeable to a business owner. However, to our legal system (and most others in the world as well), this is almost universally accepted as a potential cost of doing business. What’s more, the public has an increasing awareness of their rights when it comes to negligence and personal injury, which is why the number of negligence claims in public places have been rising in Singapore.
What should an employer and business owner do to minimise this cost then?
Public liability insurance
The most obvious answer would be some sort of risk financing option. And public liability insurance is a ubiquitous offering by most insurance and finance companies.
The concept is simple enough; with public liability insurance, your business is covered against legal liabilities for bodily injury or property damage done to a third party arising from your business operations.
There are variables to consider, such as the nature and size of the business, as well the inherent risks involved with the business operations. These will determine the limit and cost of your coverage.
Geographical or territorial limits are also relevant. Most insurance policies will only cover the territorial limits of the business premises itself. This can be expanded to cover the entire territory of Singapore. In more specialised circumstances, such as when company officials must travel overseas in the course of doing business, this limit can be expanded even further. Of course, this will also result in additional premiums that need to be paid.
Who absolutely needs public liability insurance?
Some commercial general insurance, such as Work Injury Compensation Insurance (WICA), are absolutely mandatory for businesses under Singapore law. Public liability insurance is not one of them.
However, it might already be an established requirement for some business endeavours, such as construction and renovation projects. Event liability insurance, a specific form of public liability insurance, is also compulsory for event organisers and venue operators.
It is also becoming increasingly common for landlords to make public liability insurance a contractual requirement in commercial leases, covering both the tenant and the landlord.
Notwithstanding that public liability insurance is not strictly mandatory, it is highly recommended for businesses with the following considerations:
Owning a place of business which has regular foot traffic, which would generally include retail and F&B shops as well as business offices
Having employees who conduct work on external premises
Business insurance packages
Some insurance providers offer comprehensive business insurance packages which would include public liability. These are generally more value-for-money than purchasing a standalone public liability insurance, especially since these packages also cover other extremely important areas such as fire and goods in transit. These packages usually pertain to retail shops, F&B establishments, business offices or businesses that render personal services (such as photography or personal tutelage).
As such, those looking to set up a new business in any of these areas would do well to consider business insurance package options that include public liability coverage.
How to make a public liability claim
Different insurance providers will have different processes. But generally speaking, in the event that an incident which may give rise to a claim has occurred, one should refrain from admitting to liability first and instead notify your insurance provider. If a crime has been committed as part of this incident, a police report should be made.
When submitting a liability claim form, the following documents will most likely be needed:
- Incident Report
- Police Report (if applicable)
- Clear photographic evidence of damaged property
- CCTV footage of the incident if available
- Repair/Replacement Quotations (preferably from more than one source)
- Purchase invoice/receipt of damaged property
- Tenancy Agreement and/or Contract Agreement with independent contractors (where applicable)
- Third party claimant’s legal documents, such as letter of intention to claim, Writ of Summons, etc.
Read also: 7 Key Changes to the Work Injury Compensation Act (WICA) That SMEs Need to Know: Effective From 1st September 2020
Read also: COVID-19: How to Reduce Your Company Insurance Costs During This Pandemic
Read also: Business Planning: What is Keyman Insurance and Why Do You Need It?
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