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Contractors Liability Insurance Overview
A brief overview of contractors liability insurance in the United Kingdom.
What Is Contractors Liability Insurance?
Contractors liability insurance is an industry expression used to collectively described the liability insurance requirements and specialist needs of contracting trades and occupations. It is also used by insurance companies in relation to the contracts required to fulfil these needs.
When we refer to contractors liability insurance we are talking about;
- Public Liability Insurance (including product-liability where appropriate)
- Employers Liability Insurance
Whilst these are generally available contracts of legal liability, the contractors liability policy wording is usually tailored to the specific requirements of contractors and will include a number of standard policy endorsements and features appropriate to a wide range of contracting trades.
Public Liability Insurance
The public liability insurance policy protects the insured in respect of their legal liability for injury loss or damage to third party persons or property arising out of and in course of the business. the product liability extension to a public liability insurance policy protects the insured in respect of their legal liability arising out of the supply of a product or service to third parties.
The limit of indemnity under a public liability contract referred to the maximum amount payable by the insurer in the event of a claim. Currently in the United Kingdom limit is tend to start at £1 million, with options to increase this limit to £2 million, £5 million, £10 million order the limits as required by the insured or by any contract terms to which the insured has agreed.
As previously described, the policy provides indemnity in respect of legal liabilities arising out of the business. It is very important that the insurance business as disclosed to the insurer and as appearing on the policy schedules is correct, adequate and inclusive of the works undertaken by the policyholder.
Employers Liability Insurance
It is a legal requirement in the United Kingdom for all businesses and individuals who employed other persons to hold employers liability insurance at the required legal limit. The employer's liability insurance policy protects the insured in respect of their legal liability for injuries, illness or diseases sustained by employees, arising out of the course of their employment.
The current legal requirements under EU law is for limit of indemnity of £5 million, although in the United Kingdom there is a standard limit of £10 million on employers liability insurance policies. ( this limit is restricted to £5 million in respect of claims arising acts of terrorism). The limit under the policy may be increased upon request.
There are few exceptions to the requirement for employer's liability insurance and these include limited companies where the sole shareholder is also the sole director and employee, and and there are also restrictions where employees are directly and closely related to the employer. In the latter case it is highly advisable to ignore this exception and effect appropriate cover.
How Much Does Contractors Liability Insurance Cost?
premiums for contractors liability insurance are calculated by underwriters based on the nature of the activities undertaken the insured combined with hysterical claims information for the trade and the level of work undertaken.
This calculation can be made based on turnover and wages information applied to rates set for a particular occupation adjusted for the claims experience of the insured.
More recently, premiums the smaller businesses have been calculated by per capita based premiums where a set premium is charged per head for principals and employees. Once again the rate is directly related to the occupation of the insured.
Many contractors liability insurance policies are available from under £100 per year, to many thousands of pounds for the larger and more complex risks.
Subcontractors
Many businesses engaged the services of subcontractors in the undertaking of work. From an insurance perspective, these contractors are divided into two classifications; Labour only subcontractors without their own insurances, where for the purposes of the public liability and employers liability insurance they are treated as employees; and bona fides subcontractors with their own insurances, where the insurer will consider the public liability insurance risk on a contingency basis in respect of work undertaken by the subcontractor for the insured.
What Are Endorsements on Contractors Public Liability Insurance Policies?
Most insurers issue a standard public liability insurance wording for contractors, and often this policy will include a number of endorsements to the standard policy cover. It is by the use of these endorsements of insurers will seek to restrict certain types of activities or ensure compliance with required risk management under the policy. A clear understanding of the endorsements and your public liability insurance policy is essential in your ability to assess the adequacy of your insurance arrangements.
If you have any queries regarding liability insurance policy endorsements, or indeed any other aspect of the contract you should contact your broker or an adviser for further advice.