Anyone who is in business runs the risk of a compensation claim being made against them.
Compensation claims can be costly to settle. It’s not uncommon to see settlements that are in excess of £250,000 and some compensation claims result in settlements that are over £1,000,000.
They can also be difficult to deal with. If you have a burglary, fire or flood, it’s usually fairly straightforward to handle the claim. But compensation claims can involve complicated legal arguments.
Compensation claims are covered by liability insurance.
Liability insurance
There are a number of different types of liability insurance:
- Employer’s liability insurance – which protects you if an employee claims compensation from you
- Public liability insurance – which protects you if someone else claims compensation from you
- Products liability insurance – which protects you if someone claims compensation from you because they’ve suffered a loss as a result of a defect in a product that you’ve sold or supplied.
All of these types of liability insurance cover any compensation awarded against you. They also cover any associated costs and expenses, such as any legal fees incurred in the handling of the claim.
Importantly, your liability insurer will have a fully trained team that will be able to handle any compensation claims made against you on your behalf – saving you from having to deal with any legal issues.
The problem, though, is that public liability insurance doesn’t cover compensation claims that arise as a result of professional activities and excludes claims that arise as a result of any advice that you have given. To cover these types of claims you need malpractice insurance.
Malpractice insurance
Malpractice insurance is another type of liability insurance, and it protects professionals if compensation claims are made against them as a result of any alleged professional negligence.
You don’t actually have to be legally liable to benefit from malpractice insurance. Often people will “try it on” and make a claim against you that isn’t valid, but malpractice insurance is still essential when that happens because although the claimant doesn’t get any compensation, your malpractice insurer will defend you so you wouldn’t need to employ solicitors to conduct your defence.
If you are giving advice or acting in a professional capacity, it is vital that you have malpractice insurance to protect your business. Relying on a standard public liability insurance policy to protect yourself could mean that you are uninsured in the event of a compensation claim being made against you.
