Personal liability: How much cover should your clients have?

In general, whether an individual or company, your client should have as much liability cover as can be afforded – both in terms of the cost and the scope of cover.

In the early nineties a booklet was produced entitled “Yesterday’s policies won’t meet tomorrow’s needs”. It stated that the standard personal liability cover (including motor and other forms of cover) is inadequate – generally, limits are low, standard policies are restrictive, and while policies vary generally, they often exclude cover for many common liability risks, and provide no cover for others, as detailed below.

Liability excluded:

- for many claims for consequential loss or damage,
- arising out of ownership of vacant land, and
- arising out of contract.

No cover provided for:

- pure economic loss,
- defamation or other injurious statements false arrest and/or imprisonment,
- negligent statements,
- trespass,
- nuisance, wrongful disturbance or servitude, or
- gradual pollution, seepage and contamination.

Sadly, while there are some solutions today, many people are still incorrectly insured.

Implications for ordinary citizens

Litigation surrounding the building of the 18-hole Blair Athol Golf Estate in the grasslands bordering the Cradle of Humankind World Heritage Site, illustrates the threats facing ordinary citizens.

Four neighbouring residents who objected to the development on grounds of its adverse environmental impact had a R170 million defamation suit slapped on them! After the Mail & Guardian published an article regarding this and other controversial developments in September 2005 under the headline “Developers ride roughshod over laws”, the developer’s lawyers threatened to sue the newspaper. It would have had no protection under the standard conventional policy. In the end, they successfully defended the action, but it was only in February 2011 that the matter was finally resolved.

Massive claims awarded

The largest claim awarded to an individual - a foreign visitor to South Africa - following bodily injury was settled some 10 years ago, at the equivalent of R80 million. Such an astronomical claim was serious enough for the government to impose caps on damages that a person injured in a motor accident can claim, for fear of bankrupting the Road Accident Fund.

This, however, does not prevent a person injured in a non-motor situation from claiming astronomical amounts following a domestic accident.

Opportunities for brokers

In light of this, brokers are well-advised to ensure that clients’ liability policies are extended to include the “broad form” wording to provide a wider scope of cover, and that the limit of indemnity is increased substantially, as high as can be afforded by each client.