Why you urgently need to consider increasing your liability limits ….
Personal Injury compensation awards have been steadily increasing over recent years. If you employ people or undertake a trade that has the potential to cause injury, high levels of damage or provide a product that used in or incorporated into a CRITICAL process, you should consider increasing your limits of indemnity.
Claim costs however, are now set to rocket due to the Lord Chancellor discounting the rate of discount on large awards due to a poor investment return because of record low interest rates.
In plain English – if a claimant receives a lump sum payment of £1M they would invest it in order to pay for their care over their lifetime – low interest rates means this lump sum needs to be greater to ensure the same amount is available in the long term.
|Example 1 :
|Example 2 :|
|Severe head Injury caused to a child passenger in a car. Will require 24 hour care for life expectancy of 73 years.||Aluminium log landed on claimants foot which needed amputation.|
|Previous Cost £13m||New Cost £28.5m||Previous Cost £2.3m||New Cost £3.5m|
|Example 3 :
|Example 4 :|
|Severe brain Injury by an employee who fell from a height of 8m will need 24 hour care.||A cyclist hit a pole that was installed incorrectly leading to severe head injuries.|
|Previous Cost £5.3m||New Cost £10.6m||Previous Cost £6.8m||New Cost £10.7m|
Insurers will inevitably increase premiums due to them having to pay out higher claim costs, but also as compensation awards increase re-insurers will also be paying more in claims, forcing up the cost for Insurers who buy re-insurance.
How does this affect you?
Under your contract you may only be required to carry £2M, £5M or £10M Public Liability Insurance and £10M for Employers Liability.
However, in LAW your liability is UNLIMITED – you cannot “contract” out of compensation for Personal Injury.
Your current Limit of Indemnity may not be sufficient to pay the whole of a claim as in the examples above exposing your Company to “uninsured” claim costs.
Furthermore, Liability policies are written on an “any one occurrence” and/or an “aggregate any one year” basis.
So if more than 1 person were to suffer the same debilitating injuries OR there was damage to property & bodily injury arising from the same event (eg 2 people fell from the roof in example 3 or a very expensive car had hit the pole in example 4) you would be left without adequate limits for the occurrence or without a limit for any further claims during the year.