We all know that accidents happen – people, both employees and the public, get injured in the workplace – but what gives most people a shock is the massive implications and costs that can unfold as a result.
Bearing in mind that a workplace could be your home – it certainly is when an electrician or plumber, for example, comes on site – there are a number of pitfalls that can prove very costly in the long run (even resulting in prosecution for some).
Common mistakes many make include:
- The limit of indemnity people were insured for was too low; and
- The nature of activities that was disclosed when the proposal was done actually differed from what was claimed against.
For example, a company may start out manufacturing and distributing dog food. But the business morphs and evolves and soon a breeding centre or dog kennels are added. One day, somebody gets bitten, but the insurance company declines the claim because justifiably they can say, “No, we have you down for distributing dog food – we didn’t know you had dog kennels”.
This leaves the business facing huge costs in reparations, legal defence costs, loss of business reputation and fines and penalties (some of which you can’t insure against).
For a good example of the cost that liability can inflict on a business, let’s look to the hospitality sector.
In a recent true story, the manager of a bar failed to ask an underage drinker for their identification (this was during the Christmas season). The result was a $1,000 fine and the café was closed for three days. The Bar manager’s license was revoked for 28 days – this is all standard.
It’s normal business practise in the hospitality industry to ‘borrow’ the neighbour’s bar manager to act as a locum bar manager. However, because it was the busy period, the bar couldn’t find a locum manager and had to remain closed over the Christmas period.
The business lost more than $55,000 worth of turnover and income over their busiest period. If their business had liability, consequential loss cover and statutory liability (to help with the fine and penalty), they would have been okay.
Bear in mind that cost is not a factor. One million dollars of statutory liability cover could cost you as little as $276 (including GST) per year – it is dependent on the nature of the business, number of employees, turnover, etc. but it is not expensive cover to have!
The problem is not the cost of the insurance, or what goes wrong, but the cost to the business – a health and safety investigation is bad enough – which includes reparations, penalties, fines and loss of reputation could cripple the business.
Photo by: Kyryll Ushakov