Why You Need Public Liability Insurance

I recently came across a perfect example of why insuring a business for public liability is so necessary. And it all started with a tiny oversight.

This case study follows a company that sold and supplied control systems for large agricultural businesses. The job in question was one that involved installing a sensor array into a group of silos used for storing grain. The sensors would be connected to a control system that regulated things like temperature and humidity within each silo, with the aim of prolonging the useful life of the stored grain, and keeping it in a controlled state. However, a subcontractor forgot to wire up one of the silos correctly, and his mistake wasn’t uncovered for nigh on two years. Unfortunately, the stock was pretty much waste product by then.

Grain silos are large objects. Very large. A single silo can store anything up to several thousand tons of grain for the very biggest, and certain several hundred tons for smaller ones. That amount of grain represents a lot of money, or in this case, a sizeable loss. The grain store decided to sue the firm that did the installation, holding them culpable for this loss.

The grain owners were seeking compensation for a few million dollars to compensate them for the loss of their grain, and the loss of the profits too. This could have had a devastating effect on the sensor system company and would have probably shut them down and put the workforce out on the street. The reason it didn’t was that the company directors were wise enough to buy a public liability policy to protect themselves against just such instances like this.

The insurance company took on the legal liability for the incident, defending the business and establishing liability. They settled with the silo owners, paying out an agreed sum for the loss of the grain, and covered the legal costs associated with the claim. This enabled the sensor systems company to continue trading without the burden of such a potentially large bill hanging over their heads and the disastrous consequences this could have had.

The last point worth taking away, is that the legal fees involved in defending a claim, whether liable or not, are paid for by the insurer. With legal fees being quite costly, even when a claim has no basis, the financial damage caused by having to pay legal fees can still be considerable, which is unfair, but does make public liability insurance look good value.

Matt Withers is Business Insurance Manager for Coversure Insurance Services. For a business insurance quote or more information about business insurance, please visit our site.