Liability insurance are insurance policies designed to protect against risks from liabilities towards other people. We have simplified the sector into 3 major types.
Public liability Insurance
Public liability insurance indemnifies the policy holder for all amounts for which they may become legally liable regarding bodily injury or property damage incurred to another during period where the contract is enforce.
This type of cover may exclude liability for particular vehicles or equipment which are covered typically covered in comprehensive third party car insurance policies.
Product liability Insurance
Product liability insurance provides cover for the potential liability arising from the manufacture, sale, supply or distribution of defective products. It is designed for individual or companies which make, sells, supplies, imports or distributes defective items may be liable to pay compensation for the injury or loss incurred directly from using the defective item.
Defective is defined when the item does not provide the level of safety that the general community is entitled to expect. The court or arbitration body will determine if a product is defective.
The policy will not cover any damage if the producer knows that the product is defective before the sale. Usually it only covers manufacture defects not design issues (see below for professional indemnity). It covers replacement or repair cost for products as well as recalls.
Insurance policies covers only the country where the policy is purchased. Hence there are no inherent foreign exchange risk (EURAUD or AUDJPY) between payment between insurer and policy holder.
Professional indemnity Insurance
Anyone who is regarded as a professional where the day to day service includes advice to another party of a skillful nature will be covered under a professional indemnity insurance. This covers not only traditional professional such as lawyers and doctors but to many other occupations such as directors, architects and consultants.
Persons who provide expert/professional advice for a fee can be made liable for loss caused by careless, negligent or otherwise inappropriate advice. The policy would cover against liability for loss, injury or damage arising from a mistake or failure by the professional to exercise the required level of skill. This liability may extend not only to the person(s) who paid for the advice but others who the professional should foresee will rely on the advice.
For example, existing and prospective shareholders may rely upon written advice by an accountant to a company’s board of directors as to the value of the company. If loss results, the professional may be successfully sued.
Professional indemnity insurance may also cover the legal expenses in defending an action. In the event of a claim, it can help protect the insured’s assets and ensure they can carry on their business.
Many professional institutes require professional indemnity insurance to be held by a member as a prerequisite to the member holding a practising certificate.