Bertus Visser, Chief Executive of Distribution at PSG Insure
It is no exaggeration to say that the liability risks faced by businesses have never been higher.
The rise of social media has made it much easier for third parties to connect with one another and launch class action lawsuits, consumers are increasingly becoming aware of their rights and options for legal recourse, and changing company legislation gives shareholders and customers more solid grounds for litigation.
In addition to this, legal fees rise each year at rates that are well above inflation (something that is expected to increase even more sharply as law firms start working towards recovering from the effects of the pandemic).
To top it off, the Covid-19 pandemic has changed the playing field in ways that few could have predicted. Companies now have additional responsibilities around compliance with new health and safety standards, and directors are at higher risk of making (actionable) errors that result in lost revenue in this strained economic climate.
The good news is that liability insurance is keeping pace with the risk landscape and is becoming more sophisticated by the day. It’s vital for insurance advisers to stay abreast of these changes and to have a solid understanding of the liability risks that businesses face, so that they can distinguish themselves aside as a trusted risk adviser.
Some of the most important risk mitigating liability products available to businesses include:
Liability is one of the most widely used types of liability insurance and is the minimum cover that a company should have in its portfolio. The product helps protect businesses that have a high volume of foot traffic or that operate in close proximity to the general public, such as restaurants, against personal injury claims. It is also a company’s first line of defence against litigation by employees if the business is taken to court for labour-related disputes. Lastly, if your business has to issue a product recall, liability is absolutely invaluable in helping the company to carry the massive cost of recalls and related third party claims.
Directors & Officers (D&O) cover
The Companies Act makes it possible for third parties to claim damages directly from the directors of a company if they have failed or been negligent in carrying out their fiduciary duties. This means that directors put their own finances on the line every time they step into the boardroom.
The Covid-19 pandemic has increased company directors’ risk exposure. The responsibility of ensuring compliance with Covid-19 protocols ultimately rests with the directors, and they can also be held liable if the business loses revenue because of inadequate risk management. D&O cover is crucial to protecting a company’s board and enabling them to make decisions with confidence.
If a company delivers any kind of professional service, the skilled professionals within that business can potentially be exposed to litigation for errors or negligent acts. Especially during times of economic instability, professionals are often pushed to deliver services or advice that fall outside of their professional qualifications.
The time limitation for legal action is also incredibly long for most professionals. Architects and engineers can see liability suits arise 10, 15 or 20 years after they have signed off on work – and where minors are involved, victims have up to one year after reaching adulthood to pursue legal recourse.
Cyber liability cover
Last, but certainly not least, all businesses need to insure against increasingly prevalent cyber risks and ensure that this risk is being managed correctly. The Protection of Personal Information (POPI) Act 4 of 2013 is now in full effect, and any business that deals with customer information is at risk.
Cyber liability cover can assist in providing funds for legal defence against regulatory action, as well as any third party claims that arise from successful regulatory action. Arguably, the most valuable aspect of a cyber policy is the value-added risk management services that insurers offer as part of the product. These may include cyber security consulting, security training and managing the company’s data security.
It’s important to remember that while not all of these products will apply to every business, there is one crucial universal rule relating to liability cover: uninterrupted cover is key. Liability claims can take years to manifest, and if there is any interruption in cover between the time of the claim and when the event took place, it’s likely a policy will not pay out.