What's civil liability and why do I need to know?
Heard the term a thousand times before but not sure what it means? You’re not alone. It sounds like something that belongs in a law court rather than in everyday life.
So why does it matter?
Because civil liability is very much a part of everyday life. Civil matters concern ordinary citizens, their rights and their protection so, if you’re responsible for the civil matter in question, you can be sure it's taken very seriously. You'll almost certainly have to Do Something About It.
That’s especially important if you own a business, because there’s always a chance you could be on the receiving end of a civil claim.
Back to basics
At its simplest, civil liability means being responsible for actions and practices that could damage others, but which aren't criminal. So they’re not pre-meditated or against the law.
Instead, civil liability concerns the times when there isn’t any intention to cause harm, but harm occurred anyway. If you’re a business owner, that might mean having a faulty piece of equipment that injures someone. Or doing a piece of work that’s judged not up to scratch.
In cases like these, the person affected might decide you bear civil liability for whatever’s gone wrong, and try to claim damages. And that can leave you open to some pretty hefty compensation payments, not to mention legal costs.
It doesn’t end there either, because we’re not just talking about your defence costs. If you end up on the losing side, you’ll have to pay the claimant’s expenses too.
And did you know you can face a civil claim even after you’ve already been through a criminal prosecution – say for a breach of Health & Safety regulations? If you’re found guilty, the person who’s suffered the damage can make a second, civil claim against you for compensation. A double blow, then.
All of which leads us neatly to another important question: is there anything you can do to protect yourself against civil claims?
Easing the pain
Yes there is.
Professional indemnity (PI) insurance is your guardian angel when it comes to claims against your business, and does the job of covering legal costs and compensation.
Well, some PI insurance does.
Because not all PI policies are created equal – which means you need to be aware exactly what your policy does and doesn't cover. Otherwise, you could find yourself seriously out of pocket.
At the heart of professional indemnity insurance lies the distinction between policies that deal with negligence only, and those that offer full civil liability. It might not sound like much, but it makes a world of difference and it affects whether or not your business is covered for a claim against it.
A matter of negligence
Negligence only policies catch the eye because they’re cheaper. But that’s only because they cover less. They’re only concerned with what’s in the policy wording – and that means any claim scenario not specifically mentioned is excluded.
That’s fine if negligence cover is all you need. After all, you know your business best.
But let’s say you accidently break your client’s confidence, leaking details of an under-wraps project, and she sues you for the damage caused. Depending on your policy’s wording, your insurance might not cover it.
The other thing about negligence only policies is that they’re based on a finite pot of money. So, depending on which level of cover you’ve opted for, they’ll only cover compensation and legal fees up to that limit.
That means, if you’re unlucky enough to be hit with two big claims that take you over your annual limit, you’ll have to find the cash to cover the overspill yourself. And that can hurt.
Civil liability policies throw the net wider and take care of both negligence-based and civil claims. They’re more or less foolproof and cover your business for any claim made against it in a civil court, for whatever reason – unless it’s explicitly excluded within the policy wording.
That can be especially important if, say, you’re unaware new regulations have come into force, and you should have put new practices in place, but haven’t. If you’re now operating outside the regulations, no matter how innocently, and a claim comes in as a result, your civil liability still covers you.
This type of policy also pays out differently to negligence only PI. Claims are treated as standalone, so even if you make more than a single claim in a year, as long as each one falls below your maximum level of cover, it’s taken care of.
Plus, there’s another benefit. Legal costs are handled separately to any compensation due. And that means you’re covered for anything spent on your defence up to the same threshold as the overall policy – it doesn’t come out of a combined fund that also pays out compensation, and is treated independently.
Something to think about
At the end of the day, only you can judge how likely it is your business will be on the receiving end of a civil claim.
But now you know what civil liability is, as well as why it’s relevant and what a civil claim entails, it’s a good idea to remember that the type of professional indemnity insurance you buy has important consequences, and is just as significant as the level of cover you choose.
For more help and advice about what insurance you might need, call 0345 222 5360 and talk to a friendly expert.insurance explainedmanaging risknegligencerules and regulations