Civil Liability Insurance Explained

What is civil liability?

Civil liability claims can arise from:

Understanding civil liability insurance

Unfortunately, civil liability insurance is a broad term and there is not typically one insurance policy that can offer protection from all the different types of civil liabilities that can occur. It is common that small businesses to large corporates will need to purchase a combination of different insurance covers under different policies.

Civil liability covers include:

• Professional liability insurance - designed for professionals and service providers, against allegations arising from failing to meet their duty of care, resulting in harm or financial loss to a client or third party.
• Public liability insurance - is design for businesses which interact with the public and provides cover against compensation claims made by third parties for injury, illness, or damage to their property.
• Employers' liability insurance - is a compulsory legal requirement for any business that has employees, and will offer financial protection against compensation claims arising from injury or illness at work.
• Products liability insurance - offers protection to businesses involved with manufacturing, distribution, sale, or supply of physical goods and protects against claims arising from product defects.
• Directors and officers' liability insurance - provides financial protection for individuals against civil, criminal and regulatory proceedings, while acting in a managerial capacity on behalf of the company.
• Cyber liability insurance - protects against third party liabilities arising from data breaches, cyber-attacks, unauthorised data access, loss of sensitive information, and other forms of malicious or accidental incidents.
• Employment practices liability insurance - provides financial protection from claims arising from a range of employment disputes (i.e. wrongful dismissal, harassment and discrimination).
• Corporate legal liability insurance - is provided in conjunction with directors and officers insurance, to protect the company itself, rather than the individual directors and officers.
• Medical liability insurance - is for healthcare professionals to protect them against them for medical malpractice or negligence claims if a patient suffers injury, illness, or harm as a result of medical advice, diagnosis, or treatment.
• Trustee liability insurance - designed to protect trustees against personal financial loss arising from their duties and responsibilities in managing a trust or charitable organisation.

Professional liability and negligence

These are viewed as more difficult to succeed, because they must prove you owed them a duty of care, you breached that duty and they suffered financial loss as a direct result. However, if they have a contract with yourself and can prove you failed to deliver on the professional services that were agreed, they potentially have a higher chance of making a successful civil liability claim under breach of contract. 

However, in the modern world, civil liability claims have become common place against both a wide range of professionals and service providers that hold themselves to have a higher degree of expertise than the average person. Advertising, consultancy, contractors, design, inspection, intermediaries, marketing, project management and software development. Just to name a few, can all become the target of civil liability allegations and should consider professional indemnity insurance.

• A negligence policy – provides cover if you breach your duty of care, by way of a negligent act, error or omission. 
• A civil liability policy – provides cover for negligence, breach of contract, breach of trust, breach of fiduciary duty or breach of statutory duty. A civil liability insurance policy does not restrict cover to the nature of the civil wrongdoing.

Protections against civil liability claims include:

1) Contractual conditions

• Specific description of services – can reduce the risk of any misunderstandings occurring down the line.
• Limitations of liability – will attempt to restrict the damages one party can recover from the other party. 
• Consequential losses exclusion – will attempt to restrict the damages which are not a direct result of an incident but are instead consequences of that incident. 
• Performance standard – your contracts provide a performance standard no greater than reasonable care and skill.

2) Complaints handling

A complaint is a dissatisfaction, whether written or oral, whether justified or not, about your failure to deliver a service. A six step strategy can be found in the Complaints Investigation Toolkit to mitigate potential civil liabilities.

3) Risk management

4) Civil liability insurance

About the author

Simon Taylor is a respected senior industry professional and a Chartered Insurance Broker with over 20 years’ of experience in the commercial insurance sector as an underwriter, broker and director.