Consumers urged to have personal liability cover

Lynda Brown, Regional Manager at MUA Insurance Acceptances.

With the various complexities that exist in insurance products, a common mistake that many consumers make is failing to pay adequate attention to liability cover. In doing so, they place themselves at an increased risk of massive financial losses.

This is according to Lynda Brown, Regional Manager at MUA Insurance Acceptances, who says that it is imperative that consumers educate themselves on the increasing exposure that liability claims present and the importance of ensuring that they are sufficiently covered in the event of a liability claim.

According to Brown, the short term insurance market generally deals with two main types of liability cover that impact the personal lines and commercial insurance: personal liability cover and public liability cover. "The exposure for both types of risk can often overlap and thus where a gap may exist within a personal insurance policy, an extension to include an element of public liability cover is imperative."

"A classic example of a personal liability case would be an avid golf player who one day hits his golf ball into the highway by mistake and it is determined that this ball caused an accident on the highway," says Brown.

"The golf player could be held liable for the damages caused to vehicle(s) and any bodily harm to their occupants, not to mention the legal fees."

Another good example is a young child who is pushing a grocery trolley through the car park and accidentally bumps into a Ferrari knocking the side mirror off; the child (or parent/guardian) will now be responsible for the damages to the car.

On the other hand, Brown points out that public liability is required for those consumers who work from home either permanently or from time-to-time.

"Should a client come to see the homeowner for work purposes and their usually friendly dog 'Bruno' bites the client, the homeowner is now liable for their client's medical bills. Due to the fact that the liability arose while the homeowner was conducting business, it no longer falls under personal liability but public liability."

This above example demonstrates a potential gap in personal liability insurance cover, as insurance policies normally exclude liability arising out of conducting business or one's occupation. This means that those who work from home, or potentially have clients come visit them at their home, could face massive legal claims for damages should they not have a commercial policy with public liability cover in place, or at least a specialist personal policy that does extend to cover this.

There are two main challenges when it comes to liability cases, says Brown.

"Firstly, they cannot be ignored - legal fees will be required in order to defend oneself. Secondly, it is difficult to determine how much cover is enough because liability insurance is a limit of indemnity, not a sum insured, so essentially it is not so easy to define the ultimate exposure of the risk being insured."

It is also not possible to tell the judge ruling a personal liability case that the insurer only has a total of R3 million in liability cover, so they cannot afford any further legal fees or pay-outs. The court will then begin attaching the assets. Brown says that this is why it is wise for policy holders to ensure the liability cover in place is at least equal to the value of their assets. "Basically, if the policy holder's net asset value adds up to R20 million, they should have at least R20 million in liability cover."

She says that following the trend of the United States of America and Australia, South African consumers are becoming increasingly litigious.

"This is largely a result of traditional and social media empowering society about its legal rights. The positive is that liability cover is generally very affordable, so consumers have no excuse to ensure that they have sufficient liability," adds Brown.

"Whilst personal liability insurance is hardly tested, should the need arise it can be life-changing. It is therefore advised that consumers ensure that they are adequately covered by a specialist personal policy designed specifically to meet their specific exposures," concludes Brown.