Liability Risks for Businesses – dealing with the unexpected

~ Courtesy Santam

It can be incredibly difficult for business owners to estimate how much potential legal liability their ventures carry. It is much harder to determine than the risk of brick-and-mortar assets, stock, or vehicles. However, accidents happen all the time and, if a business does not have adequate cover, third-party claims can financially cripple or even bankrupt a company.

Santam has put together a few examples of real-life claims which they have encountered in recent years, and which would not easily have been anticipated in relation to the business activity where their clients were legally liable for damages:

• Shopping Centre | A walkway was slippery due to spilt ice cream, which the parents or the centre cleaning staff did not clean. Sometime afterwards, a third party slipped and suffered physical injury of a permanent nature.
• Manufacture | While doing hot work outside, the client started a fire, which spread to adjacent property causing physical damage to third party property, as well as physical injury to a third party who suffered third-degree burns.
• Supplier | The insured unintentionally supplied contaminated products, which were incorporated into the final product. The entire production run had to be destroyed, and the insured was held liable for the costs of production.
• Fuel delivery | While unloading stock to underground tanks, a staff member did not earth the dispenser and a fire started, injuring the assistant as well as employees present on site.
• Garage | A staff member dispensed the incorrect fuel type, causing damage to the vehicle engine and components.
• Restaurants | A child was hospitalised after ingesting rat poison he had found while crawling under the table where the parents were sitting. A pest control company had laid down pellets to get rid of rats and the restaurant did not anticipate that anyone (human) would be able to reach this poison.
• Entertainment area | A child was injured on a trampoline in a playground area, which was provided by the business together with a child minder.
• Bakery | A gate fell and injured a child

How to assess your business’ risk

It’s clear from the examples that third-party claims are often completely unexpected. Even if a business takes care of its actual operating processes, liabilities arise from different aspects of business, over which the insured may have little or no control. Businesses should therefore always fully disclose their activities and anything that form part of those activities.

For example, animals always pose a risk, anything to do with children is extremely sensitive, and so are any adventure activities or equipment.

The continuous monitoring of walkways and other public access areas for potential hazards, as well as the immediate remediation of any circumstance that could result in third-party injury or property damage must form part of the insured’s standard operating procedure to prevent an occurrence.

Schedule regular check-ins with your broker and inform them if you have acquired any new equipment, expanded your services, and appointed new suppliers, to mention a few.

Be honest and upfront with your broker and inform them of any events that have taken place which may result in a potential claim.

What to know about third-party claims and liability cover

Remember that a third-party claim might not always be lodged immediately after the event has taken place. However, the insured must notify their broker immediately if he or she becomes aware of any event that might result in third-party liability. Also train your staff to watch out for and report any incidents that may have liability repercussions.

BThird parties can submit claims up to three years after an incident, which is the standard prescription period by law. The reason why the third party might only issue a letter of demand/summons so long after the event, could be that the third party only wanted to enforce his/her rights post the event, which is often done with the assistance of an attorney. The true severity of injuries cannot always be determined on the day and may only manifest at a later stage.

If you would like more information, speak to one of our knowledgeable brokers today. Simply email us at info@dwdv.insure or call us on 014 592-1077.