Beware – Liability Claims Can be Tricky

What is a liability claim? 

For a concept characterized by the painfully delicate coverage policies that accompany its issuing, a liability claim is quite simple: when the insured asks for financial assistance from the insurance company because of allegations made against them from a third party. Liability insurance coverage is, therefore, the protection the insurance company provides you, the insured. Although there are various specific forms of liability insurance, the most commonly owned policy is General Liability Insurance.

For a business or a homeowner looking for an all-round, basic form of protection, this policy is designed to protect you against five key grievances: 

1. Negligence.
2. Damages to a third party’s property (e.g. neighbors, renters…).
3. Medical costs for bodily injuries or deaths of a third party (e.g. customers, house guests).
4. Slander or damage to reputation (usually for businesses).
5. Legal expenses in defense of the liability.

So what’s so tricky about it? what are you not covered for?

Although broad insurance coverage may seem like you have it all under control, liability insurance policies are often caked in exceptions. These won’t even apply to you if you’ve broken the law. Just make sure the door doesn’t hit you on the way out! 

On the other hand, one who is on the right side of the law when sending out a liability claim faces other challenges intrinsic to intricate insurance policies. Usually, this involves the insured filing a claim beyond the coverage the insurance policy originally agreed to defend. For example, one’s liability coverage for home flood damage may require coverage only if the repair costs exceed AED 5,000. If the insurance company finds you can cover flood damage with AED 4,500, you better start mobilizing that garage sale to cover the costs on your own. Depending on your specific case, suing your insurance company to cover costs may be an important step to consider. Alas, one can hope it does not get to this point.

With that in mind, you should be aware of what General Liability Insurance policies tend NOT to cover, in order to avoid any surprises: 

1. Employee recovery from bodily injuries (this includes illnesses too), traced back to your business. Alternative insurance policies with a more commercial focus, considerably on workers, would be required in this case. i.e. Employer’s Liability Policy
2. Repairs to a business car. This would probably fall under commercial liability policies specifying in automobile coverage.   
3. Issues between employees and employers within your own business. Employment Practices Liability Insurance would indeed deal with finer matters such as discrimination and harassment in the workplace. This is mostly intended to defend business owners as despite being proven innocent, expensive lawsuits are best handled with efficient insurance brokers by your side.  

What happens if you get stuck in liability coverage exceptions? 

In a utopia, you would have read and remembered every clause in your liability insurance deal. On the day you signed it, you asked your insurer every hypothetical question to any and every situation that could be applied to the policies outlined in your contract. Although this is nobody’s reality, solutions to settle insurance dysfunctions are readily available to make up for human kind’s accident-prone nature. 

Arbitrators. In a dispute between the insured and the insurers or any other third party filing a liability claim, arbitrators are those in charge of settling issues outside of a courtroom. Liability policies may include binding arbitration clauses. These project future discrepancies between parties and save money on lawsuits by agreeing to the arbitrator’s final decision. Non-binding arbitration clauses contrastingly, give both parties the option to reject the arbitrator’s decision on who is guilty and consequently, who owes what. The option of a court case is hence, put as a final attempt to put a maddened liability claim to rest. 

At the end of the day, it really depends on if your insurance provider can recover from any losses made by the original liability claim. If it cannot, expect a hefty boost in your insurance premium, whether or not you were at fault. Ask our experts at Petra Insurance how you can get the best coverage with the most transparency from your broker.