Liability Insurance Claims
The public liability insurance account is the most volatile in the portfolio of a general insurer. It is volatile because it covers a very wide spectrum of risks ranging from the small single man business which will generally produce small simple claims to the large contracting wholesaling or retailing risk, which can produce claims from the very small to the very large.
The twin questions of estimating and reserving are very important in liability insurance claims, but as can be seen from the widespread nature of the account, problems can be experienced in these aspects.
As with all liability claims under whatever category of policy they arise, there are two questions which have to be answered rather than the one which applies in material damage policies:
- Is the insurer liable under the policy? It is necessary for some checks which are purely mechanical and routine to be carried out to determine whether the policy is operative. Has the premium been paid or is it the subject of special accounting arrangements with the insured and/or their brokers? Does the claim as reported fall within the policy period. Are there any endorsements applied to the policy which might disallow the claim?There may well be a check against the proposal form or very initial enquiries may reveal that there has been possible concealment – and this embraces both non-disclosure and misrepresentation – at the time that the policy came into force. If this is so not only will the policy not respond to the claim but the policy may also be declared void ab initio.
- Is the insured liable to the third party? This will be a question of fact or in rare cases a question of law. It is necessary for all the facts to be ascertained and then for those facts to be considered in the light of the law and the duty owed by the insured to the third party and to consider whether any defences are possible to the claim.
There is then when those two questions have been answered yet a third. How much will the claim cost? It has to be remembered that if the public liability insurance claim is going to be contested then there is an additional amount to be considered in respect of costs.