Civil liability insurance
Among different types of property insurance, civil liability insurance deserves particular attention. In the theory of insurance, such insurance is classified as strictly speaking property insurance. It is so because civil liability insurance directly covers a very special group of risks.
Contrary to property insurance or personal insurance, the damages covered with civil liability insurance do not have such “tangible” and directly experienced character – it is not connected with damages to our property or health. However, the actual cover of this type of insurance is much broader.
Covering the civil liability of the license holder, the insurance protects the license holder against the financial consequences of potential claims raised by other parties or entities to which they have caused injury and which they are obliged to make good according to the law.
In this way, civil property insurance protects the property of the license holder in full, especially against the need to spend it to cover such claims. It is worth underlining here that the insurance cover includes not only the existing material components of the insurance holder’s property but also their future income or receivables. Exhausting the means of satisfying the claims with the existing material components of their property or financial resources does not free the person that caused the damage from the obligation to redress it in its remaining part from future income.
Estimating the scale of potential claims resulting from the damage caused gives an idea of the scope of such insurance not only with respect to the current status but also the future financial security of the insurance holder.
Discussing civil liability insurance offers, one can identify many characteristic groups of civil liability insurance, e.g. mandatory insurance, professional insurance, transport insurance, private life insurance, etc.
From the point of view of the target Client group of an insurance broker, the most basic and the most important type of insurance is the civil liability insurance covering damages incurred in relation to the property owned and the actions run (referred to as general liability, etc.). For most entrepreneurs, the insurance cover includes three civil liability regimes:
- Civil liability in tort (Civil code, article 415 et seq.), that is liability for damages caused by the insurance holder’s wrongdoing;
- Civil liability in contract (Civil code, article 471 et seq.), that is liability for damages caused by non-performance or improper performance of an obligation (a contract) by the insurance holder;
- Civil liability for dangerous goods (Civil code, article 4491 et seq.), that is liability for damages caused by dangerous goods – pursuant to article 4491, § 2 and 3 of the Civil code – manufactured or (in cases specified in the regulations) marketed by the insurance holder.
It is worth underlining here that the market practice has shaped insurance cover conditions that are not completely identical with the liability assumed under the existing provisions of law. Insurance companies limit their liability using exclusions or defining the concepts such as “damage”, “insurance holder”, or “accident” for insurance contract purposes. Some of those exclusions can be subject to modification or revocation in the course of negotiation of particular insurance conditions. Standard modifications of this type include exclusions from liability for damages caused to the employees in relation to accidents at work, damages caused as a result to environmental pollution or damages caused by the subcontractors of the insurance holder.
Introducing appropriate modifications to the insurance conditions should be the result of an exhaustive analysis of the risk posed to the insured entity.
The liability of the insurance company in the case of civil liability insurance is limited to the guarantee specified in the insurance contract that usually constitutes a liability limit per one or per all the events within the validity period of the insurance contract. It is also possible to establish a limit lower than the guarantee amount per one insured event, and in special cases – a limit for every event without limiting the number of events. Where justified, also lower liability sublimits for particular risks are used, which translates directly onto the price of the insurance policy.
While discussing civil liability insurance offers, it is worth correcting two most frequent mistakes made in relation to their cover:
- Contractual liability claim.
Civil liability insurance covers damages that the insurance holder is obliged to rectify in accordance with the existing regulations. If the insurance holder extends their liability beyond the liability determined by the provisions of law by means of the provisions of a contract concluded with any of their contractors, the insurance company will not cover the claims based on such liability provisions.
- Liability for the performance of an obligation.
As part of the contractual civil liability cover, the insurance company covers damages caused by non-performance or improper performance of an obligation, that is damages resulting from and incurred in relation to a failure to perform an obligation. However, the obligation to correctly fulfill the provisions of the contract (to perform the subject of the contract or the service) still rests on the insurance holder. This means that the insurer will not cover, for example, full or partial refunding of the price, the costs of repair of improperly performed work, warranty repairs or warranty guarantees, etc.
Professional liability insurance
Among different types of professional liability insurance, a special insurance group can be distinguished – liability insurance connected with the performance of a specific profession or with the performance of a particular function. This type of insurance is directed to people or entities that perform professional activities in an area that requires specialized knowledge, qualifications, and very often also special certification.
This type of insurance covers contractual liability, which constitutes the primary risk in this context, tortious liability, and, in some cases, also liability for dangerous goods. What is important, the financial dimension of the liability can considerably exceed the scale of the activities performed in this case (e.g. the liability of the designer for errors in the design of halls, office buildings, infrastructural structures). The insurance cover connected with such activities is usually excluded from general civil liability insurance. The list of professions and functions for which special civil liability insurance is provided by the insurance market or required by the law is long and subject to constant modifications in line with economy and legislation changes. They include:
- designers, architects, construction engineers, land surveyors;
- legal professions (lawyers, legal advisors, notaries public, court executive officers);
- real estate agents and land stewards;
- insurance agents (agents, multiagents, brokers);
- security guard agencies;
- doctors, nurses, health care entities (e.g. hospitals);
- transport agents and freight forwarders;
- tax advisors and entities providing bookkeeping services.
The professions and functions listed above are only examples of areas where professional liability insurance is applied. For many of them, the obligation to take out a civil liability policy is imposed by law; however, in the areas where insurance cover is optional, it is often neglected and that is why it is worth underlining that obligatory insurance frequently does not provide adequate protection.