Liability Insurance
Liability fundamentals
Candidates must understand public liability, products liability, employers' liability, professional indemnity and directors' and officers' cover. Liability insurance is written on an occurrence basis or a claims-made basis. Occurrence policies respond to incidents during the policy period wherever the claim is made; claims-made policies respond to claims first made during the period, often with a retroactive date and extended reporting period.
Key concepts
Know negligence, nuisance, trespass, statutory liability, and the difference between vicarious liability and personal liability. Understand aggregate limits, costs in addition versus costs inclusive, and the defence costs treatment. Understand the Compulsory Employers' Liability regime and the Employers' Liability Tracing Office.
Traps in questions
- Confusing occurrence and claims-made triggers and forgetting the retroactive date.
- Assuming defence costs are always in addition to the limit - check the wording.
- Overlooking territorial and jurisdictional limits and choice of law clauses.
Worked example
A claims-made PI policy has a £1m limit, a retroactive date of 1 January 2020, and a claim first made in 2024 for work done in 2019. The claim is excluded because the work predates the retroactive date, even though the claim was notified during the policy period.