In addition to property and net income loss exposures a business faces possibility that it will be held legally liable for property damage or personal injuries suffered by others. Anyone can sue for anything. They might not win – indeed they might be thrown out of court – but they can sue, making life difficult for the defendant even though he might have acted as a saint.
Insurance Encyclopedia
Liability sequence
Four distinct stages apply to liability claims. 1. The cause (e.g. spillage of toxic chemical onto grazing land) the initial act. 2. The effect (cows ill after grazing ) – the occurrence. 3. Discovery of injuries – the manifestation. 4. Action the making of a claim. The sequence may be lengthy or virtually instantaneous e.g. workman burns down a house. Any one stage may be used to trigger a claim. Public liability policies are usually occurrence policies, i.e. the injury/damage must occur within the policy period regardless of the time of the initial act or of the claim. In long-tail disease claims and gradual pollution many years may separate the ‘occurrence’ from the ‘manifestation’. Professional indemnity insurance is ‘claims-made’, a stage 4 trigger. See OCCURRENCE TRIGGER THEORIES; TRIPLE TRIGGER THEORY. See Figure 5. – –
Liability Without Fault
Principle on which workers compensation is based, holding the employer absolutely liable for occupational injuries or disease suffered by workers, regardless of who is at fault.
Liability, Directors and Officers Liability
The Corporate decisions that yesterday did not materially affect other people today powerfully impinge on their lives and the subject matter has a direct bearing on the potential liabilities of Corporate Directors’ and Officers’ today. The increase in litigation against directors reflects a change in the attitude of the general public towards greater management accountability and hence the position of a Director is becoming far more onerous. Actions are most likely to be commended in relation to: (i) Actual or alleged breach of trust (ii) Breach of duty or warranty of authority (iii) Neglect or Omission (iv) Error or misstatement or misleading statement (v) Failure to supervise or regulate properly. Who might bring an Action? (i) Shareholders: alleging financial loss attributable to failure by Directors or Officers responsible (ii) Employees: alleging unfair dismissal, discrimination, sexual harassment or mismanagement of pension funds (iii) Customers: alleging that they have suffered financial loss following wrongful advice on the application or suitability of product (iv) Competitors: alleging that their businesses have been adversely affected by a restrictive trade practice e.g.: price fixing (v) Members of the Public: failure to effect and maintain adequate control or services. (vi) Regulatory Bodies: for offences under the Companies Ordinance or breaches in similar legislation. Potential Allegations: The following list provides typical examples of “wrongful acts” which could be alleged against a Director or Officer – though, this is not an exhaustive list: (i) Inaccurate statements of financial conditions (ii) Errors in annual accounts (iii) Conflict of interest (iv) Lack of judgment, diligence or good faith (v) Mismanagement of funds (vi) Misstatements in prospectuses (vii) Allotment of shares (viii) Unauthorized or imprudent loans or investments (ix) Failure to obtain competitive bids (x) Imprudent expansion resulting in a loss (xi) Using inside information (xii) Unwarranted dividend payment, salaries or compensation (xiii) Misleading statements filed with the Stock exchange (xiv) Misrepresentation in acquisition agreement for the purchase of another Company (xv) Wrongful dismissal of an employee. Possible consequences: Civil Action: May involve personal liability for: (a) Damages (b) Claimant’s Costs (c) Costs of Personal Legal Representation. Criminal Action: prosecution may be brought under various Statutes. Whilst fines and penalties under Criminal Actions are not insurable, Directors and Officers may face substantial costs in arranging legal representation to defend such actions. These legal costs are covered by the D & O insurance provided the defence is successful.
Libel
A form of tort which is publication of false statement in a permanent form designed to damage the reputation of another person.
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UK: Publishers may insure against libel, slander and innuendo. Professional indemnity policies have a libel extension. See INSURANCE.
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Written defamation of another’s reputation.
Libel (Legal Terminology)
A statement made in print about an individual that is untrue and hurtful. The exception to this is under maritime law, wherein this term means a legal action taken against the owner of a ship.
Libel & Slander (Defamation of Character)
Libel and slander are tort actions that involve the invasion of the interest, reputation and good name ofperson by communicating to others information that diminishes the esteem in which the plaintiff was held or excites adverse feelings or opinions against the plaintiff. Defamation is usually made up of the twin torts of libel and slander, the first being written, the other oral.
Libel Insurance
Libel Insurance is another form of Professional indemnity, for which a small market exists. A person libeled may sue the other, the publisher, the printer and the distributor of the libel, or any of them.
Libel insurance (Liability Insurance)
Insurance that covers the insured against legal action taken due to a statement he has written that is thought to be libelous.
Liberalization clause
A feature of property policies that promises that any future change in the company’s form that would broaden coverage with no change in premium will automatically apply under the policy currently in force.
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A clause in property insurance contracts which provides that if property or endorsement forms are broadened by legislation or ruling from rating authorities and o additional premium is required, then all existing similar policies will be construed to include the broadened coverage.