When it comes to commercial insurance, the most common policies we arrange include legal liability cover for your services (such as Professional Indemnity) or your physical actions (such as Public Liability). Depending on the cover, these policies usually step in when there’s been actual or financial damage to another party.
Of course, just because someone alleges that your services have caused them financial loss, or that your actions resulted in their injury, doesn’t mean it’s true. Yet no matter how questionable the allegation, if it’s brought by a third party, it needs to be defended.
At RiskBox, we’ve helped a number of clients manage liability claims – and from our experience, many allegations are tenuous at best. That’s why we’re sharing three examples of the most spurious claims we’ve come across, so you know what to be prepared for in the future.
Our client, an events organiser, was briefed to run the logistics and timing of an awards ceremony. They weren’t in charge of the suitability and safety of the venue, or risk management throughout the event – these fell to the venue owner and the principal contractor.
Unfortunately, one of the barriers wasn’t secured properly during the ceremony, and a performer fell and injured themselves. Although the barrier was the responsibility of the principal contractor, not our client, the performer submitted a claim against both parties.
The principal contractor wasn’t willing to accept liability, meaning the claim had to move forward to the litigation stages. Luckily, our client was able to call on their insurance policy to defend them, but had they not had suitable cover in place, the outcome could’ve been much worse.
Alleged unusable website
In this instance, our client was commissioned to create an eCommerce site for a food and drink manufacturer. As is sometimes the case with this type of project, the organisation was slow to provide information, so timescales slipped and third-party technology moved on.
After receiving the relevant details, our client delivered a website that met the brief. However, those in charge said they were dissatisfied and refused to pay the final invoice. The agency chased the payment, but received threats of litigation when they tried to enforce it.
Despite the claimant alleging that the website was unusable, and that they needed to engage another agency to build a new one, the site was still in use almost 18 months after delivery. The organisation was even getting decent revenue from it.
This didn’t deter the claimant, who refused all offers of negotiation and proceeded to push through the litigation process, asking for a high amount of unwarranted compensation.
It soon became clear that the claimant was experiencing severe financial difficulty, and their litigation was vexatious rather than genuine. This meant that if the insured was to be successful, the claimant would be liquidated, leaving the agency out of pocket. Fortunately, our client had an insurance policy that they could rely on. Even if the organisation sought to close down the business afterwards, the agency wouldn’t lose out financially.
Health and safety issue
This example concerns a business that runs a group of licensed hospitality venues throughout the UK. One evening, a guest at one of the premises was picking something up from the floor when he inadvertently caught his finger, resulting in a painful splinter.
Although it was arguably a minor injury, and despite the unlikeliness that our client was negligible, the individual brought a claim not just for the damage, but also for the resulting medical expenses, and even shock.
Due to the potential costs of defending the case, both parties’ insurers decided to settle the claim rather than defend it. This led to a significant payment of several thousand pounds to the injured guest for what seemed like a totally spurious claim. And while this may have been a rather frustrating outcome, it was thanks to our client’s insurance coverage that they weren’t left footing the bill.
Also look out for…
With Professional Indemnity claims, it’s commonplace for companies that are struggling (or unwilling to pay for services) to allege breaches of contract, or even negligence, just to avoid the costs. This is a strategic move, where businesses invoke the fear of expensive legal action to pressure the delivering agency into dropping their final invoices. It’s an underhand tactic, but unfortunately it isn’t unusual.
Having the proper insurance in place means you can push for any outstanding payments to be settled. It also gives you the confidence that, if an unfounded allegation comes your way, you’re fully protected.
It goes without saying that, in today’s society, people often feel that there must be someone to blame when accidents occur – regardless of if it was an innocent mistake or a situation outside of their control.
When you consider some of the scandals that have hit the UK over the last few decades, from endowment shortfalls to PPI mis-selling, it’s unsurprising that many now feel a sense of entitlement to a payout when something goes wrong against them.
The examples in this blog are just some of the spurious claims we’ve experienced, but they’ve hopefully provided you with an increased awareness of the importance and value of decent insurance. If an incident does occur, you now know the best course of action: involve your insurers straight away.
If you’re unsure about what your policy protects you against, or to make sure you’ve got the right cover in place, always speak to your broker or insurer in the first instance. Alternatively, if you’d like to take out commercial insurance, why not speak to our friendly team here at RiskBox? Call us on 0161 533 0411 or fill in our contact form and we’ll get back to you as soon as possible.
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