A general liability policy covers the Insured’s liability to third parties arising out of Injury or Damage caused by the Insured in the course of its business activities. Although this is a very broad explanation, the cover is subject to exclusions many of which are covered under the optional sections and extensions of the policy.
- If the harmful nature of the Insured’s Product is discovered after it has been sold, it may be necessary to recover the Product from the customer. Usually this can be covered by the Products Recall extension under the General Liability policy.
- A problem can arise when the customer has consumed the Insured’s Product or has incorporated it into some other product. In that case it might be necessary to destroy property in order to recover the Insured’s Product. This is known as “rip and tear”.
- Consider an example where the Insured provides bricks which a customer uses to build a wall.
- If the wall falls down and damages the neighbour’s property, this would be a Products Liability claim.
- However, suppose the Insured discovers the defect in the bricks before the wall falls down. The problem with trying to recall the Insured’s Product is that the bricks cannot be recovered without destroying the wall.
- Recovering these bricks falls outside of Product Recall cover and is known as “rip and tear” cover.
- Rip and tear cover is very seldom covered by underwriters since it is considered to be a trade risk.
Camargue can write CGL policies in the following currencies:
- South African rand
- US dollar
- Namibian dollar
- Botswana pula
- Lesotho loti
- Swazi lilangeni
- Tanzanian shilling
- Kenyan shilling
- Mauritian rupee
- Mental injury includes fright, feelings of distress, anxiety, depression, grief, psychosomatic physical symptoms and embarrassment. Although different to physical pain it is nonetheless legal grounds for awarding damages.
- Witnessing the death of a loved one (Road Accident Fund v Sauls)
- A hospital negligently mixing up two babies shortly after birth (Clinton-Parker v Administrator Transvaal)
- In order to legally succeed in a mental injury claim the plaintiff must show that they have suffered a detectable psychiatric injury. Mere grief would not be adequate.
- Mental injury does not include a breach of contract e.g. A shop failing to deliver the wedding dress in time.
Unlike Multimark type liability policies, Broadform liability policies include mental injury in the definition of Injury. Why has it become necessary to give this cover?
- South African law is based on the Roman-Dutch law which only provided for pecuniary losses i.e. medical and other expenses, loss of earnings and loss of support.
- Around the start of the twentieth century the courts started making awards for non-pecuniary losses. Initially this was just for pain and suffering endured by the person who was injured. However this has since been expanded into general damages which includes pain, suffering, bodily disfigurement and loss of life expectancy.
- Despite this, the compensation was still limited to the pain and suffering endured by the person who was injured – there was no compensation for loved ones who suffered metal injury when they saw that injury or death.
- A well-known example of this was the 1957 court ruling on Mulder v South British Insurance Co Ltd. A mother who saw her child killed by a bus was denied compensation for her mental anguish because she did not fear for her own safety.
- A significant development occurred in 1999 when the Supreme Court of Appeal ruled on the matter of Barnard v Santam Bpk. Mrs Barnard was advised telephonically that her son had been killed in a motor accident. As a result she sustained psychiatric injury and the court awarded her compensation for this injury.
- The upshot is that South African law has changed to the point where, today compensation is not only awarded to those who were not physically injured, but it is not even necessary for them to be present at the scene of the accident.
The Multimark (MM) policy was introduced to the South African market in 1987. The policy was used extensively by most insurers until 2007 when SAIA decided that the continued use of a market agreed wording could be construed as contrary to the conditions of the Competitions Act no. 89 of 1998. Whilst the Multimark policy was no longer endorsed as “market agreed”, many insurers and brokers continued to offer the same cover under different names.
Changes to the legislative landscape, such as the introduction of the Consumer Protection Act precipitated a need for a wider liability cover. The CPA has exposed most businesses to strict liability (no fault liability) which means that a business can be held liable for the intentional, ‘non-accidental’ acts of a person who is not part of the business. Since Multimark policies only respond to liability arising out of an accident, the market has been moving towards Broadform liability which does not impose this restriction.
“Broadform” is a generic term for a liability insurance policy originating in the United States. Its introduction into the South African market was initially limited to the larger commercial and corporate risks. However during period 2009 to 2011 Camargue Underwriting Managers was largely responsible for precipitating the market’s move towards also insuring smaller businesses on a Broadform basis.
The following are key exclusions of the policy:
- Fines and Penalties – for example, liability arising from a fine which the court imposed on a company for maintaining poor safety standards.
- Deliberate acts by the Insured.
- Performance Warranties – failure to meet contractual obligations; e.g. the Insured incurs a liability to their customer for failing to deliver goods on time.
- Admission of Liability – if the Insurer’s liability increases because the Insured admitted to being at fault, then the policy would not pay for the increased liability.
- Defamation – saying or writing untrue and harmful statements is not covered. Defamation cover is available as an optional extension.
- Insurance covered by other policies or by extensions to this policy that were not selected.
- Claims arising out of a nature of business which is not specified in the policy schedule. The correct nature of the Insured’s business must be detailed on the policy schedule. If, for example, the Insured’s policy-stated business is “painting buildings”, then there would be no cover for the Insured’s work as a manufacturer of chemicals.
- A material change to the Insured’s risk of which the Insurers were not advised
- Claims arising out of war, terrorism, nuclear materials or asbestos
- Employment – no cover for injury arising out of employment unless the relevant extension has been selected
- Claims brought against directors and officers for failing to run the company properly (this cover is provided in terms of a Directors’ and Officers’ Liability policy).
- Possible claims that the Insured was aware of before the policy started
- Events giving rise to a claim which occurred prior to the Retroactive Date
- Claims that were not made against the Insurer during the Period of Insurance.
- Excess – that portion of the claim falling within the Excess is paid by the Insured
- Liquidated Damages
- Damage arising out of the confiscation of property by government
- Liability arising out of advice of a professional nature given for a fee
- Damage arising out of electrical or magnetic fields
- Aircraft – claims arising out of working on or operating aircraft
- Claims brought against the Insured in the courts of the USA and Canada or arising out of operations domiciled there
- Employee dishonesty – claims arising out of the dishonesty of employees, directors, partners, etc.
The following information is typically required as a minimum when preparing a general liability quote:
- Client name
- Nature of business – please remember that statements such as “all activities of the Insured” don’t count as a disclosure.
- Limit of Indemnity,
- Cover required – Public Liability, Products, any extensions
- Annual turnover
- 3 year claims history
- Does the client export products to USA/Canada
- Period of insurance (monthly or annual)
If the client accepts the quote then a completed signed proposal form is required on new business. Camargue’s quote is subject to the proposal form not disclosing any new material information.
The following is a non-exhaustive list of typically declined risks:
- Risks related to aircraft
- Healthcare and Clinical Trials (excluding doctors rooms)
- Underground Mining
- Pharmaceutical risks (excluding pharmacy risks)
- Cash in Transit Companies
- Hazardous Chemicals Transport Risks
- Waste disposal companies
- Stevedoring Risks
- Forestry Companies
- Firearms manufacturers
- Tobacco Companies
- Eviction services
The policy excludes liability arising out of judgements and settlements made within countries which operate under the laws of the United States of America or Canada. Those countries and territories are:
- The USA and its 51 states
- American Samoa
- Guantanamo Bay Naval Base (Cuba)
- Northern Mariana Islands
- Puerto Rico
- Virgin Islands, U.S.
- The policy does not specifically exclude liability arising out criminal action.
- However, there is no cover where the Insured intentionally commits any criminal act, or even fails to take reasonable precautions to prevent the claim.
- It is nonetheless possible to commit a criminal act despite reasonable precautions.
- Example: The Insured is held criminally liable in terms of the Occupational Health and Safety Act when during the foreman’s toilet break a worker discards his protective clothing and as severely injured.
- The legal costs incurred in defending the criminal charges would be covered under the Statutory Defence Costs extension. There would be no cover for the fines should the Insured lose the case.
- There is no obvious place where Section C – Products Liability states that Defective Workmanship is covered. However the cover is actually given through the definition of a Product.
- It is important to remember that the definition of a Product includes items which the Insured did not necessarily sell. The Insured need only have altered or installed the item (i.e. worked on it) for it to be considered as being the Insured’s Product.
- The policy defines a ‘Product’ as ‘any tangible property after it has left the custody or control of the Insured which has been … installed … altered or repaired by or on behalf of the Insured…’
- Section C – Products Liability states that “The Insured is indemnified … against claims arising out of or in connection with any Product”
- In other words,
- there is cover for the Insured’s liability arising out of a Product, and
- an item is a Product even if the Insured only worked on it (without necessarily selling or supplying it).
- To some extent there may appear to be an overlap between a Commercial General Liability (CGL) policy and a Contract Works or Contractor’s All Risks (CAR) policy in that both might cover damage to the principal’s property.
- The CGL policy provides for damage to third party property. When the Insured is working at a client’s premises, that client would normally be a third party.
- The CAR policy also provides cover for damage done during the construction process and that cover would typically extend to cover surrounding property (which could include that part of the client’s property which is not being worked on).
- Both policies exclude damage, arising from the work, to the actual part being worked on.
- Example: While painting the customer’s roof the Insured breaks the customer’s window.
- Both the CAR and the CGL policy could cover the broken window.
- Neither policy would cover the roof if the damage arose out of the work being done on it.
- However, it should be remembered that a CAR policy is often project specific. If liability arises in terms of that project, it might be excluded by the CGL policy since the CAR policy would be the more specific insurance.
- Where construction is done to an existing structure, the insurance is invariably arranged by the principal. Where it is a new project the insurance could be arranged by either the principal or the contractor. Now if the liability cover is Principal Controlled Insurance (PCI) then there would obviously be no cover because that would be an own damage claim (i.e. the Principal’s own property was damaged by the contractor and the principal is not liable to a third party).
- Although CAR policies vary greatly in terms of the cover they provide:
- CAR would probably be the more suitable insurance to cover the construction project, but
- CGL might offer wider cover for the Insured’s liability in general
- Yes, if a third party suffers Injury or Damage as a result of the spread of disease then this would be covered in the same way that other causes of liability are covered. The policy does not distinguish liability arising out of the spread of disease from other causes.
- For example, the Insured is a farmer whose animals are free to roam up to the boundary of the neighbour’s farm. Shortly after the interaction the neighbour’s animals grow sick and die. Section A – Public Liability would respond to the Insured’s liability to the neighbour.
- Yes, sub-contractors are covered as an additional Insured under the policy as long as they are working on behalf of the Insured.
- For more information see the notes on:
- Liability Assumed by Agreement
- Who else is covered in terms of the policy?
- Yes, the Products Liability and Defective Workmanship sections have been combined. This means that if one is selected, there is automatic cover for the other.
- There are significant benefits to this:
- Most clients only select Products liability, ignoring Defective Workmanship (or visa versa). Their thinking being to only insure the greater perceived risk, but all too often the loss arises from an unexpected source.
- Sometimes it is difficult to establish if the nature of the claim is that of Defective Workmanship or if it is a Products Liability claim. By automatically giving cover for both, any possible dispute is eliminated.
- It reduces the broker’s PI risk
- Yes. Unlike a Multimark policy, Injury or Damage claims arising out of the design of the product are not excluded. This is particularly important in the context of the Consumer Protection Act.
- There is an exclusion on the policy for claims arising out of any design prepared in exchange for a fee.
- This means that there is no professional indemnity cover for the product’s designer. However the other parties (such as the manufacturer and the retailer) are covered for Injury and Damage claims arising out of a design flaw.
- The policy wording does not contain a specific general exclusion which eliminates unfair labour practices (for example an unfair dismissal).
- However the Operative Clause only provides cover for Injury and Damage. This means that there is no cover for pure economic losses such as an unfair dismissal.
- There are other extensions in the policy that do provide pure economic loss cover, but they specifically exclude unfair labour practices (e.g. Pure Economic Loss extension) or their cover is described in a way that automatically precludes unfair labour practices (e.g. Breach of Copyright)
- Scenario 1: The Insured has its employee arrested for theft
Mostly, there is cover if an employee was wrongfully arrested and sued the Insured. This extension does not draw a distinction between employees and visitors, customers etc.
- The policy does exclude claims arising out of employee dishonesty, but presumably the arrest would not be wrongful if the employee had been dishonest.
- Scenario 2: The Insured’s employee is sued
The definition of the Insured includes the Insured’s employees while performing their duties. This applies at a policy-wide level.
This means that if an employee was sued in their personal capacity by someone wrongfully arrested by the Insured, then there is cover.
- Some parts of the policy do not have a Retroactive Date because there is no cover unless the loss occurred during the Period of Insurance.
- They are:
- Section B – Pollution Liability
- Breach of Copyright extension
- There is cover for pollution liability arising out of products in terms of Section C – Products Liability/Defective Workmanship. The Retrodate does not apply to pollution claims under Section C. In other words, the retroactive cover only applies to the non-pollution related claims under Section C.
- Section A - Public Liability does cover Injury and Damage arising out of the Insured’s professional services, but it excludes advice of a professional nature where a fee was charged.
- The E&O extension provides mainly Pure Economic Loss cover. However it includes liability arising out of professional services where a fee was charged.
- Normally an employee would be able to sue his employer for injuries that he sustained while working. The employer would need Employer’s Liability insurance for protection against such liability.
- The Compensation for Occupational Injuries and Diseases Act No 130 of 1993 (COID Act) has transferred that liability from the employer onto the government (it also places serious limits on how much an employee can claim).
- In other words, the COID Act has effectively eliminated the common law right of an employee to sue his employer for injury or diseases that arise in the work place as a result of an accident.
- The purpose of the Act is to: “To Provide for compensation for disablement caused by occupational injuries or diseases sustained or contracted by employees in the course of their employment, or for death resulting from such injuries or diseases; and to provide for matters connected therewith.”
- COID still applies if the employee was acting contrary to any law applicable to his employment or to any instruction of his employer, provided that he was acting in the course of business.
- Although most employees fall under the COID Act, there are exceptions such as:
- Domestic servants in private households
- Members of the armed forces or the police force
- The wilful misconduct of an employee unless that wilful misconduct causes serious disablement or death prejudicing a dependant who is completely financially dependant
- Where a worker is employed outside of South Africa for a continuous period of 12 months or longer
- Where a worker is ordinarily employed outside of South Africa and has an accident while temporarily working in South Africa
- Employees who refuse or wilfully neglect medical treatment
- The COID Act does not apply outside of South Africa, nor does it apply to the State including local, provincial and national state authorities (these entities are referred to as ‘individually liable employers’).
- The Act does not cover workers who are partially disabled for less than three days.
The Compensation for Occupational Injuries and Diseases Act No 130 of 1993 (COID Act) has eliminated the common law right of an employee to sue his employer for injury or diseases that arise in the work place as a result of an accident. However this does not mean that there is no chance of an employer being sued.
- COIDA only covers accidents. If an employee was injured as a result of the wilful act of another employee COIDA might not respond.
- COIDA may yet be found to be a breach of a person’s constitutional right to fair compensation for a loss since COIDA’s compensation payments are very limited. Consider Mankayi v AngloGold Ashanti Limited .
- The Supreme Court of Appeal had upheld a June 2008 Johannesburg High Court decision that employees who qualified for benefits in respect of the Occupational Diseases in Mines and Works Act (ODMWA) could not lodge civil claims against their employers.
- Mankayi took the matter to the Constitutional Court arguing that COIDA did not apply to him because he was compensated by the ODMWA.
- AngloGold’s counter argument was that COIDA precludes common law claims by employees against their employers (section 35(1)).
- Mankayi’s argument won. The Constitutional Court ruled against AngloGold, paving the way for Mankayi’s R2.6m occupational injury/disease claim against AngloGold.
- It is also worth remembering that COIDA does not cover any worker who:
- is employed outside of South Africa for a continuous period of 12 months or longer
- is ordinarily employed outside of South Africa and has an accident while temporarily working in South Africa
- refuses or wilfully neglects medical treatment
Yes. The policy does not specifically deal with loss of documents, but liability that would otherwise be covered in terms of the policy is not affected by the fact that loss was triggered by a loss of documents.
An exception is Carriers’ Liability and Warehousemen’s Liability where there are exclusions on claims arising out of the loss of documents (specifically securities for money).
No, the amount of the indemnity limit will be paid over and above the excess. If the excess was R100 000 and the indemnity limit was R1m, then if the Insured faced a liability of R2m, the policy would pay R1m and not R900 000.
No, a significant benefit of the Camargue policy is that VAT is paid over and above the indemnity limit.
- The Insured must have first become aware of the possibility of a claim during the Period of Insurance. There is no cover for claims (or possible claims) that the Insured was aware of before the Period of Insurance.
- The Insured must notify the company as soon as possible once they become aware of an event which may reasonably lead to a claim.
- Once the Insured has notified the company of such an event there is no time limit on when the accompanying claim may be lodged. (Some other Insurers impose a 48 month time limit.)
- The claim causing event must have occurred on or after the Retroactive Date.
There is cover for damage to:
- Vehicles in the Insured’s parking lot
- The clothing and personal effects of visitors and employees
- Property temporarily in the Insured’s care for work thereon (but not for damage arising out of that work)
- Premises (or the contents thereof) temporarily occupied by the Insured for work purposes
- Premises normally rented by the Insured
- Government property whilst on any premises permanently occupied by the Insured
- The Warehousemen’s Liability extension provides cover for liability arising out of loss to third party property whilst stored at the Insured’s warehouse.
- The Custody and Control extension provides cover to third party property whilst temporarily in the Insured’s possession for any reason.
The contract period for which the Insured pays for the indemnity provided by the Insurer
- It is the period of uninterrupted cover starting when the policy incepted and ending when it was cancelled or not renewed.
- Example: The policy started on 1 Jan 2009 and was renewed twice. The Period of Insurance would be 1 Jan 2009 to 31 Dec 2011.
- To the extent that employees are acting on the Insured’s behalf they are covered as if they were the Insured
- The policy covers the Insured’s staff while they are temporarily using the Insured’s employees in the private capacity
- For example:
- A manager in the Insured’s employ asks his secretary to buy a birthday gift for his wife. While the secretary is running this personal errand for her boss she injures someone.
If the injured person sues the boss since the injury occurred while work was being done for the boss, the policy would pay for the boss’ liability
- The policy provides cover for loss or damage to employees’
- clothing and personal effects
- vehicles parked in the Insured’s parking lot
- Injuries suffered by employees in the course of employment (provided that the Employer’s Liability extension has been selected and that the COID Act does not apply.)
The policy does not cover liability arising out of the possession or use of a vehicle by the Insured as this cover is normally provided in terms of a motor policy. Nonetheless, Section A – Public Liability does provide cover for liability caused by:
- The use of a vehicle as a tool of trade (e.g. forklift, bulldozer)
- The use of a tool or plant forming part of the vehicle
- A trailer not attached to the vehicle (and which has not accidentally become detached)
- Loading or unloading away from the road
- Damage arising from the weight of the vehicle
- Third party vehicles damaged in the Insured’s parking lot
- The possession or use of any government (especially rail service) vehicle. (A vehicle does not need to be self propelled and includes a train)
The policy specifically excludes:
- Cover provided by legislation (e.g. Road Accident Fund)
Any aircraft, hovercraft or watercraft (except cover is granted for inland watercraft less than 5m long).
In addition to covering the Insured, the policy also provides cover to:
- Employees/officials of the Insured in their business capacity
- Any party to which the Insured is contractually required to grant indemnity
- E.g. Security company acting on behalf of the Insured
- Although the policy wording does not require the Insured to notify Camargue of these contracts, a full disclosure is still necessary so that Camargue can underwrite the risk properly.
- People while they are participating in the Insured’s social organisations (e.g. visitors attending the Insured’s golf day or year end function may, in the course of those activities cause harm to a third party. The visitor’s liability would be covered as if the Insured had done the harm.)
- The representatives of the estate of the Insured (but only in terms of their liability because of the Insured’s wrongdoing)
- If, for example, you inherit the Insured’s estate, and that estate had an outstanding liability claim which was covered in terms of this policy, then in addition to inheriting the liability you will also inherit the indemnity provided by this policy.
- Most Multimark type policies only provide cover when the Insured becomes liable as a result of an accident.
- By contrast, the Camargue policy does not require that the Insured becomes liable as a result of an accident.
- This is important in situations where the Insured incurs strict liability. In terms of strict liability, the Insured is liable even when the Insured was not at fault. For example the Insured is automatically liable for the actions of its employees (while they are acting in the course of their employment). So if an employee (e.g. a security guard) were to assault a visitor, the Insured would be liable even though there was no accident.
- A less obvious (but very important) benefit is that the Camargue policy provides a wider trigger which is less likely to lead to a claims dispute:
- In order for the MM policy to respond, the Insured has to establish that the third party loss occurred as a result of an accident. The word accident appears in the operative clause and means that the onus of proof lies with the Insured.
The Camargue General Liability policy responds where the Insured is legally liable. The cover is referred to as non-accidental. The word accident does not appear and means that if the Insurers wish to repudiate a claim based on the fact that an intentional act caused the loss, the onus of proof rests with them, rather than the Insured. This can be of great benefit to the Insured when submitting a claim. There can be many different legal interpretations of the word accident so avoiding such an operative clause is prudent.
- Yes, but only to the extent that it is a pure economic loss. A smell, for example, could drive the third party’s customers away.
- Yes, provided that the Insured first obtains the consent of the Insurer before committing to the settlement. Such consent will not be unreasonably withheld.
- Some liability policies discriminate between losses that happen at the Insured’s premises and losses occurring elsewhere. In the process those policies may restrict the cover for losses that happen away from the Insured’s premises. This means that the Insured could need additional ‘Work Away’ cover.
- Unlike those policies, the Camargue policy does not reduce the cover for losses occurring away from the Insured’s premises. The Camargue policy gives full cover world wide (with restrictions for USA/Canada).
- This means that a ‘Work Away’ extension is unnecessary on the Camargue policy because the Insured already has this cover automatically.
- Because the policy offers worldwide cover, the Insured automatically enjoys cover while working at their premises as well as while working away from their premises. The latter is what is referred to as Work Away.
The ‘work therein’ example: Suppose the Insured is working in their client’s computer room. While in the room the Insured spills a cup of coffee causing damage to some of the client’s equipment in that room. Work Away refers to the cover provided for damage to the client’s equipment while the Insured was working at the client’s premises (away from the Insured’s premises).
- The Period of Insurance is the period of uninterrupted cover starting when the policy incepted and ending when it was cancelled or not renewed.
- Events that give rise to valid claims may occur at any time between the Retroactive Date and the end of the Period of Insurance. Referred to as the Retroactive Period.
- The Extended Reporting Period does not change the Retroactive Period, but it does extend the period during which the Insured can discover new liabilities (which occurred during the Retroactive Period) and lodge these claims against the Insurers.
- The Extended Reporting Period starts immediately after the Period of Insurance ends (and runs for up to 36 months).
- This cover is an option purchased by the Insured at the completion of the Period of Insurance – usually as a result of not being able to renew the cover or secure alternative insurance for the next period.
In the case of short period policies it is sometimes purchased together with the underlying cover (prior to the inception of the short period policy).
- Sometimes it is difficult to quantify a loss in monetary terms. For that reason, the Insured and a third party may agree that if a loss were to occur, then the guilty party’s liability will be a pre-agreed amount.
- Liquidated damages is an amount of money agreed upon by the parties to a contract which one will pay to the other upon breaching the agreement.
- Liquidated damages are not covered by the policy.
The policy provides worldwide cover, except for claims arising out of
- the courts in the USA or Canada,
- the activities of operations domiciled in the USA or Canada
- If one entity covered by this policy sues another entity covered by this policy, then the policy will treat each party as though they were insured separately. In other words, the policy will not reject the claim because the Insured is suing itself.
- The indemnity limit is not increased by this provision. In other words, if the indemnity limit is R1m and two parties covered by this policy are suing each other, then the limit does not increase to R2m, but stays at R1m.
- The Cross Liabilities provision does not apply to the Errors and Omissions extension and the Pure Economic Loss extension.
- Example 1: Whilst participating in the Insured’s sports club, one member negligently injures another. Even though the plaintiff and the defendant are both covered under the same policy, the policy will indemnify these people as if they had separate policies.
- Example 2: The Insured may consist of a parent and several subsidiary companies. If one subsidiary were to sue another, the policy would treat each subsidiary as though it was insured separately.
- Most Multimark policies state that each of the insured persons must be stated on the policy schedule. The Camargue policy does not impose this (potentially confusing) limitation. In the sports club example, the participants would not normally be named on the policy schedule.
- If a security company caused Injury or Damage while protecting a client’s property, they would expect the client to pay those damages. To protect themselves they would get the client to sign a contractual agreement that makes sure that client will assume (take over) the security company’s liability.
- The security company is an example of how the principal (the client) assumes the liability of the contractor (the security company). Sometimes, it could work the other way round - the contractor assumes the liability of the principal.
- Upward Example – the contractor indemnifies the principal
- The Insured is the building contractor who agrees to indemnify their employer (the shopping mall owners).
- During the building process the builder damaged a shopper’s computer. Instead of suing the builder, she sued the shopping mall since she blamed the shopping mall for not keeping her property safe.
- Before starting the renovations the builder contractually agreed to assume any liability that the shopping mall incurred as a result of the builder’s negligence.
- This meant that the builder’s liability policy responded to the claim against the shopping mall.
- Downward Example – the principal indemnifies the contractor
- The Insured is a shopping mall which contracts the services of a building contractor to revamp the mall. The contractor in turn hires various sub-contractors. Normally the contractor and each of the sub-contractors would buy their own liability cover for the damage or injury they may cause during the revamp.
- There are however some problems with this arrangement:
- The contractor and sub-contractors might not necessarily have suitable liability cover in force at the time of the loss
- If they each arranged their own liability insurance the combined cost would amount to more than the cost of a single policy issued to the Principal. These costs would undoubtedly be passed onto the Principal.
- To solve these problems the shopping mall could agree that any liability caused by the contractor or sub-contractors would fall on the mall and the mall’s liability insurance would respond.
- It is important to note that many Multimark type liability policies mostly only provide upwards cover (where the Insured covers their employer). The Camargue General Liability policy covers both upward and downward relationships.
- In order to enjoy cover for these contractually assumed liabilities, it is necessary for the Insured to disclose them to the underwriters upfront.
- A risk that forms part of the trading of the business.
- Examples include:
- Loss of business due to competition in the market
- Losing a major client
- Many trade risks cannot be insured.
- A risk that forms part of the trading of the business.
- Examples include:
- Loss of business due to competition in the market
- Losing a major client
- Many trade risks cannot be insured.
- This extension is commonly found on Multimark policies when the Insured exports products to a European Union country.
- As a result of those exports the Insured could incur liability arising out of those countries. Since the Multimark policy only covers liability arising out of southern African, the Insured would have an uninsured exposure.
- On a Multimark policy the EC Liability extension would provide for this by extending the Products Liability cover to countries in the EU.
- It is important to note that Multimark’s EU extension does not extend the policy to cover liability arising out of either strict (no fault) liability or design defects. By contrast the CGL policy automatically provides this cover.
- This extension is necessary on a Multimark policy when the Insured exports products to a European Union country.
- Unlike the Camargue General Liability policy, the Multimark policy only provides for the Insured’s liability in southern Africa. This means that when exporting to Europe, the Insured is exposed to liability beyond southern Africa. To protect the Insured it is usually necessary to add the EU Liability extension onto their Multimark liability policy.
- Because the Camargue general liability policy provides world wide cover, the Insured already has cover for exports to European Union countries.
- No, if Section C – Products Liability and Section D – Negligent Advice have been purchased then the pharmacy has cover for dispensing risks.
- Yes, it is automatically covered in terms of Section A – Public liability
- Yes, it is automatically covered in terms of Section A – Public liability
- Accommodation establishments face strict liability in terms of damage to their guests’ property. This means that they are automatically liable for damage to the guests’ property regardless of the Insured’s fault.
- Unlike the Camargue policy, many Multimark type policies provide very limited cover for strict liability.
- The Camargue policy does provide cover for the strict liability that hoteliers face in terms of visitors’ clothing, personal effects and their parked cars.
- There is no automatic cover for other items such as trade samples and tools of trade. The Custody and Control extension would be necessary to cover those items.
- If a claim falls across more than one section or extension of the policy then the total claim amount is limited to the section/extension with the highest limit
- This means that the indemnity limits of the different sections and extensions are not added together to reach a final limit of indemnity.
- The policy does not allow inadequately insured sections/extensions of the policy to be subsidised by other sections or extensions of the policy.
- For example: Suppose a policy’s limit of indemnity is R1m for Section A – Public Liability and R10,000 for Statutory Defence Costs.
- Suppose the quantum of the claim was R2m for Section A, and R20,000 for Legal Defence Costs. The policy would pay a maximum of R1m towards the claim.
- Suppose the quantum of the claim was R900,000 for Section A and R20,000 for Legal Defence Costs. The policy would pay a total of R910,000 made up of R900,000 for the Section A part of the claim and subject to the R10,000 limit for the Legal defence Costs part of the claim.
- These are the laws of the country that are not written down.
- They are ‘common sense’ laws handed down through history e.g. do not murder
- Common law is also partly made up of judicial precedent i.e. case law
- Sometimes customs form a part of common law (these customs must be long established, certain, reasonable and uniformly observed)
- By contrast, statutes are laws of the country that have been documented and agreed to by Parliament
- Consequential loss arising from an insured event is covered.
- The property damage could be small compared to the consequential damage part of the claim.
- Example: The Insured may damage a small, inexpensive but vital part of a third party’s machinery. As a result of delays in the supply of the damaged part, the machine is unusable for a long time causing the owners to suffer a serious loss of income.
- When companies have private railway sidings they are required by Transnet to enter into agreements in which they undertake to indemnify Transnet for injury or damage arising out of the railways’ presence on the company’s property.
- This includes damage which Transnet causes to the Insured’s property, third party property and also to Transnet’s own property.
The policy provides cover for damage to Transnet property as well as third party property damaged by Transnet while they are on the company’s property.
It would depend on the source of the smoke.
- If the smoke arose out of fire or explosion then there would be no cover (under Section B - Pollution) since the proximate cause was an excluded event.
- The claim might be covered under Section A – Public Liability, since this section does cover fire and explosion.
- If the smoke arose out of something else, such as overheated materials, then this would be covered.
- Yes, if the associated liability is covered by the policy. There is cover irrespective of whether the Insured is defending a civil or a criminal matter.
- The policy would also cover the plaintiff’s costs if the matter went to court and costs were awarded against the Insured.
- The Insured would not need to repay the legal costs to the Insurers if they lost the case and were found guilty of a criminal offence.
- Often companies disclose information to each other subject to a confidentiality agreement.
- A breach of confidentiality is an example of a pure economic loss, since the loss arose without injury or damage being done to tangible property.
- A breach of confidentiality is not normally covered because the Pure Economic Loss extension excludes liability that arises entirely out of the Insured’s contractual undertakings.
- However, if it can somehow be shown that the liability would have arisen anyway, even in the absence of the confidentiality agreement, then that liability could be covered under the Pure Economic Loss extension.
- Yes, but there are exceptions:
- There is no cover if the Insured was aware of the gradual operation and did not take reasonable measures to prevent the loss
- There is no cover for pollution unless it was sudden and unforeseen.
- This is also known as a manifestation clause and it gives a specific single date to a gradually operating loss.
- Defective products example:
- If a manufacturer were to produce a batch of defective products which caused people to get ill, it may be difficult to precisely establish when the “injury” actually occurred because the people who became ill from eating the product may have had symptoms for a while before realising what caused their condition
- There could be dispute as to when the incident causing the injury actually occurred, was it when the product was manufactured, when it was sold, when it was consumed or when the symptoms developed?
- During this protracted period there many have been various insurers each with different sums insured. This would be a significant problem on a losses-occurring policy but even on a claims-made basis problems could arise. Clearly it is the date that the claim is instituted that will determine if it falls within the policy period on the claims-made basis but there is still the matter of the Retroactive Date.
- The Continuous Exposure Clause defines the date of injury or damage in the absence of any other indisputable evidence.
- The policy provides cover for the Insured’s liability arising out of :
- damage to employees’ or visitor’s cars while temporarily in the Insured’s care for parking
- employees’ and visitor’s clothing and personal effects in the car
- There is no cover for items in the car that are not personal effects, such as trade samples and business equipment.
- The entire policy is subject to a general exclusion which excludes claims arising out of the dishonesty of the Insured or its employees, directors or principals.
- The following extensions specifically reiterate this exclusion:
- Warehouseman’s Liability
- Warehouseman’s Liability Consequential Loss
- Carriers’ Liability
- Carriers’ Liability Consequential Loss
- Pure Economic Loss
- Errors and Omissions
- A pure economic loss arises where a third party suffers a loss without there being Injury or Damage.
- This cover can be found in the
- Pure Economic Loss extension
- Products Inefficacy extension
- Errors and Omissions extension
- Breach of Copyright extension
- Advertising Liability extension
- Pollution section – a smell coming from the Insured’s property could drive a neighbouring restaurant’s customers away without damaging property or injuring anyone
- The definition of “Damage” includes the loss of control of tangible property. This means that even in terms of Section A – Public Liability, there is some cover for a pure economic loss.
- E.g. After changing the access code to the customer’s digital safe, the Insured got distracted and forgot the code. Not able to access the contents of the safe, the customer suffered a loss of income.
- A pure economic loss arises where a third party suffers a loss without there being Injury or Damage.
- Any loss under a liability policy will arise out of either:
- Injury – this includes sickness or death
- Damage – this includes theft
- Pure economic loss – a loss where there has been no Injury or Damage
- A pure economic loss is also known as a financial loss since they are purely pecuniary (monetary) nature.
- Mostly a pure economic loss arises when the Insured denied the third party access to something that it uses to generate an income
- For example, the Insured’s negligence in handling certain chemicals causes a potentially serious threat to the neighbouring businesses and as a result they need to be evacuated. The neighbours could sue the Insured for the loss of income and expenses they suffered because of the evacuation.
- Where Injury or Damage has not yet occurred, but it is anticipated because of the Insured’s negligence, that could result in a pure economic loss.
- For example, the Insured neglected to inspect the foundations properly, the building now needs to be torn down and rebuilt.
- For example, the Insured is a courier company which is delivering examination papers. It makes the delivery to the wrong address. It soon discovers its mistake and recovers all the examination papers undamaged. However, by that time unauthorised people have seen the questions and it is necessary for the examination paper to be redone. The cost of redoing the examination paper is a pure economic loss.
- Although the Pure Economic Loss extension provides cover for these losses, many pure economic losses are best covered elsewhere in the policy.
The abovementioned examination paper example would be covered under the E&O extension and not the PEL extension because the PEL extension excludes losses arising out of the supply of any Product
Custody and Control
Carrier’s Liability Extension
Goods in Transit Policy
Pure Economic Loss
Errors & Omissions
Example: The Insured’s receptionist sprays too much insecticide and as a result the neighbouring businesses need to be evacuated. The neighbours sue the Insured for loss of income during the evacuation.
Example: An engineer makes an error in calculating the correct concrete mix resulting in an excessive hardening period. That delay causes a builder to miss his deadline and therefore having to pay penalties. The builder would sue the engineer and the E&O section of the policy would respond to that claim.
Errors & Omissions