FIRE INSURANCE Fire insurance is an essential class of insurance to aid the growth of…
BUSINESS INTERRUPTION AND LIABILITY INSURANCE
BUSINESS INTERRUPTION INSURANCE
This type of insurance is designed to indemnify an organisation for the loss of revenue which may be caused by the following activities:
- Fire and special perils.
- Engineering breakdown risk.
- Computer damage and breakdown risks.
This kind of insurance covers the loss of profit that would have been made if there were no fire or some additional expenditure that could be incurred as a result of fire damage physically to the property insured.
It is obvious that the normal fire policy on property covers only direct material loss. It does not extend to indirect loss of a business which would result from fire. Therefore there is need to insure the risk as these losses could affect the production cost and probably increase the price of which the goods will be sold and might reduce the patronage of the goods because of the increase in price. The following will surely be affected as a result of the situation discussed above:
- Certain overhead costs will remain at their full level even though sales are reduced.
- Net profit will be reduced.
- There may be certain increase in cost incurred to keep the business growing temporarily.
Liability is what one could incur as a result of owning a property. It is the loss that may arise from the use of one’s property by either the owner or someone else using it on behalf of the owner. The insured person legal liability to others in the area involving motor, aviation and marine had been explained earlier in this chapter. There is need to consider the ways by which the rights and interests of others can be intrigued by the insured person through their various activities. This is described as follows:
1) Employer liability insurance: This is a compulsory insurance which requires every employer of labour to effect against the liability for bodily injury or disease sustained by their employees arising in the course of their employment. This is to ensure that employer does not suffer financially but is compensated for any money he may have to pay in respect of a claim to provide compensation if any employee was killed or injured. The fee payable to the lawyer for legal representation and the medical charges for medical examination of the injured employee are included in the policy.
An employer liability insurance certificate is expected to be displayed in the premises of the employer to indicate compliance of the employer to the legal requirement.
2) Public liability insurance: Personal or business activity of someone may cause injury or damage to another person or the property of another person. This injury ordamage suffered by another person is the subject matter of public liability insurance. The type of risk that could becovered could vary with the situation or position of the policy holder. The risk could be in terms of:
- Personal public liability
- Product liability
- Business risk
- Professional liability
a) Personal public liability: These require a duty of care from you to your neighbour. Who is your neighbour? It is a question that is explained according to THING SKULL CASE: Your neighbour is anyone that could be affected by your action. If the above assertion is true, an individual owes a duty to his neighbour not to cause injury or damage to their property or their person. Liability of this nature arises in the following circumstances.
Out of ownership of a house or pet. Out of reporting activities or in the simple act of crossing the road without looking.
Let us use the case of CLERK V SHEP STONE (1986) where Mrs. Shepstone caused a motorcyclist to swerve due to her failure to properly look out while stepping from the pavement. Mr. Clerk, the pillion passenger suffered severe injuries as a result of the crushed bike which was due to Mrs. Shepstone’s action. Mr. Clerk brought an action against Mrs. Shepstone in the court for damages in which $24,500 was awarded as damages paid from her personal public liability insurance policy. Otherwise, Mrs. Shepstone would have looked elsewhere for the payment of the damages.
b) Product liability insurance: This is an insurance against the insured legal liability for any injury to persons or loss or damage to property caused by their products or goods. It ensures financial compensation for that person injured by the product purchased due to manufacturer’s negligence which is expected to be proved by the affected person.
For example, a producer of Bournvita is liable to Mr. Ade for suffering serious stomach upset after taking the Bournvita. It was actually established by a medical doctor that the stomach upset is as a result of the consumption of the Bournvita taken by Mr. Ade. The loss suffered by Mr. Ade including the medical and legal expenses were compensated by the product liability insurance of the producer of Bournvita.
c) Business risk policy: This is a liability insurance policy designed for business owners which provides cover for them against their legal liability to others due to the various activities. These activities are
- Loading, unloading and delivery of motor vehicle.
- Carrying out work on the premises of third party.
- Storage of goods in the property of third party.
- Commercial travelling, etc.
Insurance policy that covers business risk provides compensation to the insured for any incurred liability as a result of carrying out his or her business.
d) Professional Indemnity: This is the policy that is created for a professional (doctor, lawyer, insurer, or an engineer) in the discharge of his services to others. These professionals are assumed to be expert in their respective fields. Any of these professional activities that results in loss or damage to others shall be compensated under professional liability insurance arrangement.