Liability Insurance: Protecting Your Business 

Why liability insurance is important for all businesses 

Liability insurance provides businesses with protection against various risks which can occur over the course of their operations. Even with the best policies and procedures in place things can—and do—go wrong. Without liability insurance, businesses would have to face these risks on their own, potentially being met with large bills and lasting damage to their reputation.  

With appropriate policies in place, a business owner can have peace of mind that they are properly protected. Liability cover is relevant for all industries and is something that any business owner should be thinking about. It can, however, be complicated to understand the various types of cover a particular industry might need. A great broker can therefore add real value in this area.  

 Here’s what you need to know about various types of liability insurance, straight from the experts at Runacres. 

Why is liability insurance so important? 

No company goes out into the world intending to cause any harm or damage. Morals and ethics aside, that would be very bad for business. Accidents do happen, however, and employees can also be careless or act in ways that the owner or manager could not foresee. If you have any dealings at all with third parties and/or their property, there are likely to be situations in which you could be held financially responsible for damages to your customers or clients. 

Even if your business operations are 100% compliant with all regulations, in line with the leading industry practices, and managed by experienced, qualified, and conscientious people, there is room for the unexpected. No business is exempt from that possibility.  

Let’s look at an example: a tree felling company accidentally fells a tree in the wrong direction and it causes major damage to someone’s roof. Without the right insurance cover, the company could be liable for all repairs—and if it’s a multimillion-dollar mansion they dropped a tree on, they might find themselves in a very sticky financial situation. While tree felling is a fairly obvious high-risk activity, there are risks everywhere.  

Any company which subcontracts work to other businesses or tradespeople should also be aware that they can be held “vicariously liable” for actions of a subcontractor. This is another reason why it is imperative to have liability insurance, as even if work is subcontracted out the business will ultimately be the one liable to their client.   

All of the above considerations aside, one very good reason for many businesses to have liability insurance is that a certain type and level of cover will often be required by governing bodies, local council, or other authorities in order to operate. In many industries, including various trades, specific levels of cover may also be mandatory in order to step on site or win a particular contract. 

What types of liability cover should I know about? 

There are a large number of liability covers available. The exact cover you need will depend on your business and industry. Here is a rundown of the most common policies: 

Public liability: This is the most common and essential liability insurance for businesses. It covers legal liability for damage or injury to third parties or their property. Whether mandatory in your industry or not, it is crucial. Without it, potential costs of damage or repair could easily cripple a company.  

Statutory liability: This specific type of liability insurance protects your business against potential breaches of many Acts of Parliament in New Zealand such as the Health and Safety Act or Consumer Guarantees Act. It is not possible to insure against fines, but statutory liability can include cover for reparations and defence costs. Having cover for defence costs is important should you need to defend your business against a claim by another party—as these costs can quickly escalate. 

Employers liability: This policy provides cover for your legal liability if one of your employees is injured in circumstances not covered by ACC. Examples of this may include a repetitive strain injury, mental health, or other illness. A good employers liability policy should also include defence costs (as outlined in more detail above). 

 Directors and Officers Liability: This insurance is intended for directors and other senior officers of a company, who can be held personally liable for the actions (or inaction) of the business in the course of their duties. It can protect them against personal financial loss and is therefore an important consideration. 

Cyber liability: Any business that uses a computer will have cyber exposure. Some of the risks include hacking by malicious parties, transmission of a virus to a third party, or privacy breaches resulting in reparations to be paid. A comprehensive cyber policy can help protect your business against these exposures. 

Other employment-related insurances: Employers often need insurance to cover other employment-related liabilities. This might include employment disputes cover, which comes into play if someone raises a personal grievance, or fidelity cover, which deals with theft by employees. 

If you’re an owner of an SME or larger business, chances are you need to consider a range of liability covers. With various options available as outlined above, deciding on the right insurance company and the right policies can be a tricky task to navigate. 

That’s where an experienced insurance broker can help. Insurance experts like those in the Runacres team can accurately assess your risks, recommend the types of insurance you need, and find policies that offer the required cover as well as value for money. The service of a broker doesn’t end there, either. Should you need to make a claim on any liability insurance, they offer assistance to make the process as smooth as possible. 

 If you are without liability cover for your business or are not sure that what you have is adequate or the best option, get in touch with the Runacres team. We operate New Zealand-wide and would be happy to discuss what you need.