Insurance News And Info

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The 2011 Riots: What are the insurance implications?

The riots in various parts of the UK last year were horrific and the damage caused to property was well over £200m. In addition there was substantial, loss of trade and fears were raised as to whether such events could become regular occurrences as youth unemployment rises and the economic situation hits living standards.

There was some criticism of insurers being slow to react and it is difficult to know how representative this was. Insurers normally react quickly to large events but this was no doubt complicated by the circumstances which may have caused some delays.

Most businesses have cover against riot and vehicles and plant that are comprehensively insured are covered against damage as well. Also, businesses usually have cover against loss of trade as a result of premises being damaged and some may have cover for this even if there own premises were not affected. Provided the figures insured were adequate, businesses should be well compensated.

Since 1886, Police Authorities have been responsible for loss or damage caused by a riot. A riot is broadly defined as ‘12 or more persons who are present together and use or threaten unlawful violence for a common purpose’.

This means, although insurers will deal with the claim and pay compensation, they are likely to recover some of the outlay from the local Police Authority. Businesses that were underinsured or with no insurance can claim for any shortfalls themselves.

The police only pay for physical loss and damage and not for loss of trade. They pay for repairs or replacement of stock or equipment damaged or stolen but this may not be as much as insurers may pay. The cost of rebuilding the furniture store totally destroyed in Croydon is likely to cost far more than its old value. Insurers will pick up the cost of the difference as well as the loss of trade until the business is back to its pre riot levels.

It is unlikely insurers will increase the cost of cover but may well be more reluctant to provide cover in areas considered potential riot hotspots in the future. However, the cover will still be part of normal insurance arrangements for business and emphasises the need to ensure cover is arranged in anticipation of the worse happening.

Broker of the Month

BJP were presented with a bottle of champagne to mark their achievement as Broker of the Month for September 2011.

Reducing the cost of uninsured Motorists

Under legislation, insurers have to meet all claims against uninsured motorists by people injured or whose car or property has been damaged through their negligence. This cost is now approaching £1bn a year and unfortunately is factored into the premiums of all the responsible owners and businesses that insure their vehicles. This extra cost adds about 10% to the cost of motor insurance for everyone. With motor insurance costs rising rapidly, the problems are likely to accelerate.

The insurance industry and the government are determined to reduce this cost and make driving uninsured more costly and difficult. Insurers already provides all details of insured vehicles to central database( MID) which enables police and other insurers to find out instantly who is insured and with whom. This is helping greatly to solve the problem. Police has also gained extra powers to remove and dispose of uninsured vehicles.

In January of this year, a further step was taken under ‘The Continuous Insurance Enforcement’ regulation. This made it an offence to be a registered keeper of a vehicle not covered by insurance even if it is not driven on the road.

Spot checks will be made on the Motor Insurers abase and DVLA records and where there are discrepancies action will be taken. All business which own vehicles which are not insured but are not being used on a road should make sure that they declare the vehicle SCORN (Statutory off Road Notice). Failure to do so may mean prosecution in the future.

Court Awards are continuing to rise. Make sure you are adequately covered.

A woman who sued a plastic surgeon who "played God" with her life has been awarded more than £6m in damages. Penny Johnson, 49, claimed Le Roux Fourier carried out experimental surgery during a facelift in August 2003 that caused nerve damage to the right side of her face and led to her financial and IT consultancy business going into administration. The judge awarded her £6,2m.

Whilst there are very few businesses that carry out plastic surgery the level of award is a reminder of how costly personal injury claims can be. Last year an award of £11.15m was made to 22 year old Wasim Mohammed who was severely injured in a motor accident. The accident occurred in 2004 so the chances are there is a claim going through the legal process now that is approaching £15m. The increasingly higher level of court awards act as a warning to all businesses to review the level of cover they have on their employers, public and product liability covers.

Most employers liability policies have a limit per incident of £10m. If a claim exceeds this, then the employer would have to meet any excess out of the business. This would force most business into liquidation. There is also a chance of multiple employee injuries that make even greater awards possible. For most businesses, the cost of increasing cover 150% to say £25m is comparatively low and we would recommend clients consider upgrading. This is even more important if employees are highly paid.

Public liability provides protection for injuries to people visiting your premises, whilst employees are working away and to neighbours caused by an incident at the premises. Standard policies have low limits compared to awards that currently can be made. Some are as low as £1m; £5m is, probably the standard figure and levels above this have to be specially negotiated. We would, once again, recommend much higher limits especially for businesses that carry out work away from their premises or are situated in affluent areas or close to other businesses or property.

Product liability policies cover injuries arising out of the use of products or services provided. The limit here is normally for a year rather than one incident. The figures usually mirror the limits for public liability and similarly can be far too low especially if you are providing products or services that could cause injury or illness.

Many entrepreneurs have spent years building up their business that has a high value, accumulating many assets, and regard the business as their pension. All could be lost, because of one unfortunate severe injury if you have concerns, please contact us, otherwise we will discuss at our next review.

And it is not just phone hacking!

News of the World sports reporter was awarded nearly £800,000 in damages late last year after he brought an employment tribunal claim for unfair dismissal and disability discrimination, alleging he was bullied out of his job. Matt Driscoll was sacked in 2007 while taking sick leave for stress-related depression. His tribunal award of £792,736 is likely to be the highest such payout in the media industry. The tribunal found that Mr Driscoll had been subjected to “a consistent pattern of bullying behaviour.” The tribunal singled out Editor Andy Coulson as “the original source of the hostility towards the claimant”, noting that other senior managers either followed his lead or shared his views. The News of the World claimed that Driscoll previously faced disciplinary proceedings over a single punctuality incident and alleged reporting inaccuracies and that the grounds for his dismissal concerned capability and qualification.

DAS, the leading legal expense insurer has reported a massive rise in employment disputes during the recession. They state that the number of employment claims handled on behalf of personal clients increased by 80% in just two years. This enormous growth in workplace disputes is further illustrated by the 59% increase in the number of calls to our legal advice service relating to employment matters. Out of allEmployment related calls; those involving questions about redundancy increased the most, rising 190% since 2007. The high claim for bullying and the growth in unfair dismissal claims show how important it is that businesses have insurance protection against employee claims and top class legal advice immediately available.

Assessing Pollution risks

Environmental damage and the resulting claim and clean up costs are becoming more prevalent and costly and businesses need to assess the risk both at their premises and any location where they may be working.

Environmental risks have three features:

• A source of pollution
• A pathway for it to travel
• A receptor (where the damage/harm is done).

Each of these needs to be considered separately in assessing the pollution risk from a particular event. For each source of pollution there can be several pathways and receptors. The effects of pollution can be felt at great distance from the initiating event and can include pollutant release, damage to property, plants and animals and harm to human health.

A Five Step Assessment Procedure

1. Identify the hazards posed by the site
2. Identify the consequences of an incident
3. Identify the extent of the consequences
4. Estimate the probability of the consequences identified
5. Estimate the risk of pollution at the site.

Key Action Steps

• Review the activities, substances, quantities, and nature of processes on site.
• Ensure that all legal liabilities are met in terms of Authorisations, Licences, Permits and Consents
• Ensure that your broker is fully aware of the activities carried out by your business
• Develop and test emergency plans and review results

Assessment
Site management systems will greatly affect the risks posed by ensuring that adequate control systems are in place. When estimating the extent and consequences of an incident, the geography and surroundings of the site must also be carefully considered.

Risk assessors should consider the pollutant pathways as well as the nature and toxicity of the release.

Since pollutant pathways can be long, damage may occur at great distances from the site. Estimation of liabilities may require expert help and should consider at the very least the impact of pathways through air, surface water, groundwater and the soil. Pollution can travel through these media very quickly and easily. Site drains also provide a quick and easy pathway for pollutants to leave the site.

Factors which can have a profound effect on the damage which may be incurred include the proximity and density of population, land use, water abstraction points, sewage works, fish farms, and boreholes.

If your business is in a location where it can cause pollution, then it should carry out a full assessment. We may be able to introduce someone who can help but above all let us know of any potential risk so we can advise on any insurance implications.

Insurance Claims for UK riots

Policy holders be aware, losses caused by rioting can be recovered from the local Police Authority in whose areas that damage occurred under the Riot Damages Act (1886). Claims for the recovery of such losses are known as subrogation claims and must be made within a strict 14 day deadline.

If you suffer loss or damage as a result of the recent riots, please be aware that insurers require immediate notification in order to lodge a claim in writing with the relevant Police Authority within the recorded deadline.

A full definition of riot is included within the Public Order Act (1986). One of the key elements is “12 or more persons must be present together and use or threaten unlawful violence for a common purpose and the conduct of them (taken together) is such as would cause a person of reasonable firmness present at the scene to fear for his personal safety”.

The Deepwater Rig Disaster

A year ago, it would have been inconceivable that BP, the largest British listed company could face financial meltdown in the next 12 months. Yet, for a period in the early summer, there were doubts whether the business could survive the disastrous oil leakage in the Gulf of Mexico. The costs of the disaster covering the rig itself clean up costs and potential loss of profits and compensation claims, threatened to overwhelm the company. Strict liability for environmental damage meant that, initially, BP has to bear all the costs before it can begin to try to recover some from other parties. There are still threats of criminal prosecutions and huge fines. There was enormous damage to the reputation of the business that, even now, could have far reaching consequences for the future of the business. The total economic loss for BP could still be $50bn and whilst it will now survive, the business will never be the same.BP may have limited insurance cover but the vast amount of the loss has had to be borne by them.