Liability Insurance
Liability cover
Understand public liability, products liability, employers' liability and professional indemnity. Know the basis of cover: occurrence versus claims-made, and the importance of the retroactive date in claims-made policies. Understand the scope of indemnity, defence costs and the treatment of punitive damages.
Key concepts
Know the meaning of negligence, breach of statutory duty, nuisance and strict liability. Understand vicarious liability and the concept of the insured's legal liability to third parties. Know the role of aggregate limits, reinstatement of limits and the treatment of defence costs within or outside the limit.
Traps
Questions often test whether a claims-made policy responds to the date of the act or the date of the claim. Another trap is the treatment of defence costs, which may erode the limit. Understand that employers' liability and public liability are distinct covers.
Worked example
A professional is sued for advice given three years ago. Under a claims-made policy with a retroactive date after the advice date, cover may not respond. Rule of thumb: check the retroactive date for claims-made policies.