Liability risks… an alarming increase

Key liability risks to South African businesses have expanded alarmingly and need to be reassessed to make sure protection is effective.

This follows increased liability legislation and the growing tendency to take legal action when expectations are not met.

Building a defence

The exposure to liability risks has increased alarmingly, and has necessitated the creation of specialist types of liability insurance as a financial defence for companies of all sizes.

It is also vital to identify specific vulnerabilities that differ between companies and professionals, as well as their potential financial exposure. In short, it is a mistake to believe that one size fits all in specialist liability cover.

Extended liability

It is also important to understand that even a person who has left or retired from a company may still be liable for damages years later; so assumptions which are a few years old need to be re-evaluated in view of current realities. Even small oversights can be financially crippling to a company.

Brokers face a major challenge of keeping up to date with legislative changes which impact their clients. This is why insurers need to provide expert guidance to brokers that apply it in our transformed and continually changing environment so clients will remain happy and loyal. I have no idea what this sentence is supposed to say?

Needs specific

It is important to remember that there are no blanket offerings when it comes to liability and cover has to be need specific.

Below are some of the essential liability risks and covers available in the market:

• Professional Indemnity

This provides cover to professionals and those industries where services are rendered for a fee and where errors or omissions in the provision of those services can lead to third parties suffering damages or a financial loss which can add up to millions.

• Directors and Officer’s Liability

This involves the actions of individuals who may have caused damages to third parties for which they are held personally liable. The cover is for defence costs as well as indemnification for damages on behalf of executive and non-executive Directors, Officers, Committee Members, Prescribed Officers and even the Company Secretary. The codification of duties in the new Companies Act needs to be studied.

• Trustee Liability

Each Trustee of a fund is liable and has a fiduciary responsibility to all fund beneficiaries to ensure the fund is adequately protected from poor investment decisions, theft of assets or mismanagement by the Trustees. This requires specialist insurance that includes fidelity cover, defence costs and indemnification for damages officials may have caused.

• Employment Practice Liability

The liability issue here is about how an employer, director, officer, fellow employee or company, manages and handles claims arising out of employment related issues such as unfair dismissal, sexual harassment and general discrimination in the workplace.

• Bankers Blanket Bond / Third Party Electronic Computer Crime / Financial Institutions Professional Indemnity

Financial institutions have the responsibility of being custodians of investor’s monies and property. Legal liabilities to investors include: failure to adhere to mandates or responsibilities; providing incorrect or misleading financial advice, error and or omissions; theft of client’s investments or funds.

• Commercial Crime / Fidelity Guarantee

Financial loss, caused by staff dishonesty, is frequent in today’s world and a strong solution is a comprehensive crime policy and expert risk management.

• General Liability (Broad form)

This risk involves employees causing damage to third party property or where products and/or services supplied cause injury to customers.

• Special Events Liability - Stand-alone

Those who organise an event or special function are legally responsibility to keep guests safe. Liability Events insurance covers damages or bodily injury occurring at events or functions. Damage to property as a result of negligence by the organisers is also covered.