On the first day of Christmas my client gave to me…

As we approach the end of the year, we enter a season of liability. Is it a season for insurers to be jolly?

A recent video depicting a shark breaking the barriers of the cage while a person was inside it during a shark cage diving excursion has gone viral on social media.

The video depicts a fairly unusual event but does highlight the importance of proper liability coverage for any business operating in the hospitality sector.

Client’s merry making

This is especially important during the festive season because companies that operate within the hospitality sector are traditionally very busy during the end of year holiday period.

This includes restaurants, game lodges, hotels, travel agents and tour operators, adventure sports providers and other types of accommodation providers, such as a bed and breakfast or guesthouse. It is vital that all of these types of businesses have proper liability cover in place.

Businesses in the hospitality industry should also ensure that all safety precautions that can reasonably be expected of the business are taken, not only to protect their customers from injury but to also minimise the possibility of costly litigation following an accident.

It is of course impossible to eliminate all liability risk. That is why liability insurance is so important.

Legal gavel slamming

Currently, the most comprehensive liability insurance available to the hospitality sector is the broadform liability policy.

This cover varies slightly between different insurers, but the essence of the policy remains the same - to deal with third party liability claims against the business.

The cover would generally extend to pay the defence costs as well as damages awarded by the court when legal action is taken against the business following an incident.

It is however important to note that liability covers are primarily legal defence policies, and will not automatically step in to compensate the third party if an incident occurs. The third party has to establish negligence on the part of the service provider in order to succeed with a claim. Where the facts are unclear or the nature of injuries to third parties are not immediately apparent, this process may have to flow through the judicial system before liability is established.

Shark diver escaping

With reference to the shark cage diving video, the customer involved in the incident seems to have sustained no obvious physical injuries.

A claim could however possibly have been brought for some form of psychological injury, such as post-traumatic stress disorder or emotional trauma. Many liability policies have narrow definitions of injury and may not provide cover for this, which is why it is also extremely important for brokers to scrutinise policy wordings for clients.

Problems abound

When it comes to tour operators in general, liability insurance can be quite tricky. It is often the case that the tour operator is not directly involved in providing the ancillary adventure services, but instead sub-contracts the activities to other service providers.

This is where the problem arises. It is extremely important that tour operators and travel agents notify insurers if they offer adventure activities to clients, either by themselves or through an outsourced provider, as this may have an impact on their insurance premiums and conditions. As mentioned, many underwriters may be unwilling to insure certain activities.

And a partridge in a pear tree

Any business owner in the hospitality needs to make sure they are protected as their guests are important clients. It is well worth the time to get a professional involved to provide advice and guidance from an insurance perspective.

To facilitate this, it would also be a good idea to discuss disclaimers and indemnity forms with an attorney to make sure that the maximum protection is in place both from a legal and risk management perspective.