Businesses need public liability insurance to protect them against any compensation claims that are made against them.
Compensation claims can be expensive to settle, with serious injuries often resulting in compensation awards in excess of £250,000. Without insurance, an award at that level would be a problem for most businesses.
Often, compensation claims involve complicated legal issues. If you have public liability insurance your insurer can handle those issues on your behalf.
The problem is that there are certain exclusions in the cover that a public liability insurance policy provides that would result in gaps in cover for people in certain business sectors. These gaps in cover can be addressed by treatment risk insurance and malpractice insurance.
Treatment Risk Insurance
This is an extension to the public liability insurance policy. It is needed because public liability insurance does not cover claims arising out of professional activities.
This means that without the treatment risk extension, if someone suffered an allergic reaction to hair dye that you had applied, you would not be covered because hairdressing is a professional activity.
Public liability insurance covers compensation claims arising out of things that you have done but not compensation claims that arise out of professional negligence. If someone suffers a loss due to advice that you have given, that loss would not be covered by public liability insurance.
Malpractice insurance covers this type of claim. However, whereas treatment risk insurance is an extension to a public liability insurance policy, malpractice insurance operates slightly differently.
Malpractice insurance operates on a “claims made” basis. Whereas it is the public liability policy that is in force when an injury or damage occurs that deals with the claim, with malpractice insurance, it is the policy that is in force when the claim is made that deals with the claim.
Claims can take years or even decades to come in, particularly where the claim is for a disease or where it involves a child. As such, even if you stop trading, you should still keep your malpractice insurance in force. Some insurers will allow you to buy an extension to the policy to cover any claims that are made against you once you have ceased trading for a one-off premium.
Which one do I need?
Whether you need treatment risk insurance or malpractice insurance depends on what activities your business is involved in because they cover two different types of risk.
Treatment risk insurance is aimed at businesses such as hairdressers, beauty therapists and nail technicians who are providing services rather than advice. Although these businesses do provide advice, that advice is provided as an incidental service without a separate fee being charged so claims arising out of this type of advice are not excluded.
Malpractice insurance is aimed at businesses such as therapists and counsellors who provide advice for a fee, or in a situation where a fee would normally be charged. A charity providing counselling services for free would require malpractice insurance even though they are not charging for their services, because the advice that they are giving is advice that would normally be charged for.
Some businesses that are providing services and are also providing fee-based advice will need both treatment risk insurance and malpractice insurance to ensure that they are fully covered in the event of a compensation claim being made against them.
It is important to note that treatment risk insurance and malpractice insurance extend your public liability insurance rather than replacing it. These two types of insurance only cover your professional activities, and you should make sure that you have public liability insurance as well to protect you against compensation claims that are made against you that arise from any other activities.