Many tourist operators recognise that no matter how cautious or prepared they are accidents will happen when dealing with tourists. As such most operators have indemnity cover. While this protects the business from large liability claims, it also prevents operators compensating clients in cases where the operator is clearly at fault.
“Being able to step up to the plate and compensate clients for damage or loss in cases where the operator is clearly at fault will go a long way towards developing the reputation of a business and establishing them more securely in the market,” says Mark Bush, Deputy Business Unit Manager, Light & Allied Industries at Alexander Forbes.
It is highly unlikely that if you book thousands of people a year on shark dives, or run a popular white water rafting business on a remote part of the Tugela, that people will not get injured from time to time.
Yet traditionally operators have handled the risks posed by injured clients by passing liability on to either product owners or to the guests themselves.
For example, when a small South African tour operator is at, say, the IMEX travel show in
In turn the South African operator makes sure that each product owner that he or she books with assumes liability and has sufficient cover. Similarly, product owners typically pass on liability by getting their guests to sign hold harmless or indemnity forms – releasing the product owner from liability in the event a guest is injured. Bush believes that, “Passing liability to guests is correct from a liability point of view. It is not, however, always the right thing to do from a client service and reputational point of view.” The hold harmless / indemnity clause, if well worded, prevents the guest claiming against the product owner. Considering that a large claim could put the product owner into liquidation this is a wise mitigation step. “But this same hold harmless / indemnity also prevents the product owner from getting his insurer to cover a guests loss or injury - even where it is obvious that the product owner was a fault and, for reputational reasons, wants to settle the guests claim”, says Bush. The irony of this situation is that product owners who have well worded indemnities can never get third party claims settled under their public liability policies – in spite of the good premiums that they pay. “So, while product owners can rest assured that their indemnity policy will protect them against third party claims (and pay for the legal costs of doing this), this is cold comfort for operators from a reputational point of view”, adds Bush. Bush therefore strongly suggests that product owners, “Negotiate a clause into their public liability policies allowing owners to waive indemnity and have their insurer settle third party claims in those cases where the product owner was indeed negligent and, for the sake of his or her reputation, needs to be seen to do the right thing.”
In turn the South African operator makes sure that each product owner that he or she books with assumes liability and has sufficient cover. Similarly, product owners typically pass on liability by getting their guests to sign hold harmless or indemnity forms – releasing the product owner from liability in the event a guest is injured.
Bush believes that, “Passing liability to guests is correct from a liability point of view. It is not, however, always the right thing to do from a client service and reputational point of view.”
The hold harmless / indemnity clause, if well worded, prevents the guest claiming against the product owner. Considering that a large claim could put the product owner into liquidation this is a wise mitigation step.
“But this same hold harmless / indemnity also prevents the product owner from getting his insurer to cover a guests loss or injury - even where it is obvious that the product owner was a fault and, for reputational reasons, wants to settle the guests claim”, says Bush.
The irony of this situation is that product owners who have well worded indemnities can never get third party claims settled under their public liability policies – in spite of the good premiums that they pay.
“So, while product owners can rest assured that their indemnity policy will protect them against third party claims (and pay for the legal costs of doing this), this is cold comfort for operators from a reputational point of view”, adds Bush.
Bush therefore strongly suggests that product owners, “Negotiate a clause into their public liability policies allowing owners to waive indemnity and have their insurer settle third party claims in those cases where the product owner was indeed negligent and, for the sake of his or her reputation, needs to be seen to do the right thing.”
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