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Civil Liability Insurance Explained
Confused about civil liabilities? We explain what they are and provide examples below.
Tables of Contents
- What is the difference between civil liability and criminal liability?
- What is civil liability insurance?
- What is civil liability for negligence?
- What is tort?
- Do all professional indemnity policies cover civil liabilities?
- What are the civil liabilities of a company?
- How to get civil liability insurance?
What is the difference between civil liability and criminal liability?
Civil liabilities are those responsibilities you hold to others in society (such as contractual, legal or under tort ). Any breach of a civil liability will be handled in a civil court case, as opposed to a criminal court case which deals with criminal liabilities. It’s not possible to insure against criminal acts, meaning that although some insurance policies may help with legal fees when you are charged in criminal courts, none will reimburse you for fines incurred due to criminal convictions.
What is civil liability insurance?
Most insurance policies provide some cover for your breach of civil liabilities, either as a director of a company, a professional or as a member of the public. Public Liability cover is often bundled in with home or landlord’s insurance in addition to being included in motor and cycling policies, all to protect you against civil cases against you for injury caused to others whilst driving, cycling, hosting guests or renting out a property. Professional indemnity policies often include or exclude ‘civil liabilities’, but in the context of that policy the term can mean something different...
What is civil liability for negligence?
Negligence is a civil liability, which professional indemnity policies insure against. For example you may be contractually obliged to take reasonable care in executing your professional duties or it may simply be an implied term of your services as a professional , but in either case the policy covers claims that you have failed to meet that obligation for reasonable care.
What is a tort?
The definition of a tort is “a wrongful act or an infringement of a right (other than under contract) leading to legal liability”. The most common tort tied to Professional Indemnity insurance is your duty to exercise reasonable skill and care whilst carrying out your professional services (also known as negligence). You can be sued for breaching a tort even if you have no contractual relationship to the person suing you!
Examples:
- An architect provides some free advice and design services for a friend, including recommending construction companies and workmen. Following completion of some of the work her friends claim that she has been negligent and this negligence has cost them over £200,000. Although no contract is in force between the friends the claim is upheld as breach of a tort; the architect had assumed responsibility and had failed in a duty of care as a professional when working for a client relying on their skill.
- A health and safety consultant provides incorrect advice to their client, a cleaning company. As a result a member of the public slips and injures themselves, claiming compensation against the cleaning company. Although the company’s public liability insurer pays the claim, they then sue the consultant for their financial losses. The insurance company has no contractual arrangement with the consultant but they are able to recover their costs on the grounds that he has been negligent and has committed a tortious act.
Do all professional indemnity policies cover civil liabilities?
Yes, with negligence being the main covered civil liability, however different policies do this in different ways. There are two types of professional indemnity policies; the first example will not cover civil liability claims unless they are explicitly stated as being covered. The second example will cover any civil liability claim (even ones which are not listed anywhere on the document) so long as they are not explicitly excluded. The second type is the broader cover and often sold as having ‘full civil liability coverage’. Look for similar terms in your policy documentation and don’t be afraid to ask your insurer or broker to clarify.
What are the civil liabilities of a company?
By law companies are deemed entities in the same way that individual people are, therefore they may be sued for all of the same civil liabilities as any person might. There is a common misconception that limited company directors are somehow protected from litigation against them individually for any illegal or negligent actions of the company. In reality a director can be sued for their negligence or failure in the running of a company with due care and attention, and their personal assets can be taken in compensation, which is what directors and officers policies insure against.
How to get civil liability insurance
Depending on the civil liability you would like to be covered for, you can find further information on how to obtain policies here: