When Should a Retail Business That Sells Products to Consumers Consider PI Insurance?

A Retail Business is a business that sells products to consumers (excluding manufacturers, importers/exporters).

It is important to firstly explain the coverage provided by each of these policies. These policies do not overlap or provide dual cover. We have summarised an overview of common policy feature provided by each of these policies. However, each insurance company has their own policy wording. This means that coverage can vary considerably from one insurer to another, and the following overview provides only a common outline of policy features. It is important that you compare each policy based on the appropriateness of cover for your individual business needs and seek professional advice.

Public & Products (Broadform) Liability Insurance policies provide insurance cover in respect of insured’s liability for loss or damage caused negligently to third parties, who are not the insured, as a result of an occurrence in connection with the insured business.

It indemnifies the insured business against legal liability to pay compensation in respect of personal injury or property damage claims arising in respect of the Product &/Or Service sold or supplied by the insured, however it does not cover product warranty and is always subject to terms, conditions and exclusions.

In addition, these policies also provide cover for defence costs even if the action against you is false or fraudulent, and provides that an excluded circumstance does not apply.

Personal Injury – Cover may include:

– Death, bodily injury, sickness, disease, disability, shock, fright, mental anguish and mental injury

– False arrest, wrongful detention or imprisonment, and malicious prosecution

– Wrongful eviction

– Assault or battery

– Libel, slander, defamation of character or invasion of the right of privacy

Property Damage – Cover may include:

– Physical Damage to tangible property

– The loss of use of tangible property which has not been damaged but cannot be used due to Damage to other tangible property

Additional Comments

Common exclusions – Advice for a fee

– Does not provide cover for pure financial loss where no injury or damage has occurred

Policy Trigger for a Claim – Bodily Injury or Property Damage

Professional Indemnity Insurance protects an individual and/or company against claims made against them by a third party for financial compensation arising from a breach of their professional duty. It is an essential protection for professional advisers who provide professional advice or expertise services to third parties.

It provides indemnity for claims brought against the insured company and its principals, partners and employees for financial loss arising from a breach or an alleged breach of your professional duty in the course of conducting your business.

Policy features may include:

– Trade Practices Legislation – Libel & Slander – Dishonesty

– Loss of Documents – Defence Costs – Official Enquiries Cover

Professionally Indemnity Insurance generally aims to provide protection for:

– settlements, compensation and/or damages awarded against them;

– legal costs and other expenses associated with defending a claim.

Who is a Professional adviser?

Anyone who gives to another person advice and/or services of a skilful character according to an established discipline might be regarded as a ‘Professional’ adviser.

Why do Professionals need Professional Indemnity Insurance?

A Professional will hold himself or herself out as having a special skill, which can be relied upon by another. Consequently, the law requires that the Professional exercise the required skill to an appropriate level expected by that profession.

Professionals are only human and mistakes do happen. Any financial loss, injury or damage arising from a mistake or failure by the Professional to exercise the required level of skill may mean that an award is made in favour of a person who suffers a loss, damage or injury. A Professional may also be held to be liable for a mistake even though there was no negligence.

In the event that a financial loss, injury or damage arises from a failure to provide that appropriate level of skill, it may result in an award for damages being provided to the third party that suffers the financial loss, injury or damage. The Professional Indemnity insurance provides cover for damages awarded against the Insured Person and/or Company including costs or expenses incurred in defending the claim.

Additional Comments

Policy Trigger for a Claim- Financial Loss arising for a breach of professional duty.

It is important that Professional Indemnity Insurance and Public & Products Liability Insurance work collectively to ensure that the main exposures of your business are covered.

When should a Retail Business that sells and supplies Products consider Professional Indemnity Insurance?

Several key areas for business owners to consider when selling and supplying products:

• A business that charges a separate fee for advice should have professional indemnity insurance covering their overall business or the area of their business that provides advice for a fee. As mentioned above, the liability insurance policies generally excludes advice for a fee, so in the event that there is no professional indemnity cover in place, claims arising from advice for a fee would be uninsured. For example:

Computer Retailer

A computer retailer that supplies products and charges a separate fee to program and install software / hardware.

• If a Retail Business provides advice in accordance with their product sales and the manufacture instructions and does not provide a separate fee for advice regarding the sales of their products. In the event of a claim arising from negligence in relation to products sales that results in injury or damage, your liability insurance policy should generally respond (subject to the terms and conditions of the policy coverage).

However, for some Retail Businesses, in the event that they are negligence, their clients may not necessarily incur injury or damage, but pure financial loss. We provide the following examples:

Fertilisers Retailer

In the event that the wrong fertiliser was provided, and the crop did not produce, there may not necessarily be any injury or physical damage, only pure financial loss.

Pool Company

Supply of pool chemicals (licensing also requires Pool Companies to maintain Professional Indemnity Insurance)

A business owner should always obtain professional advice when obtaining and reviewing their insurance. Insurance products are legally binding contracts and under current legislation it places responsibility on all parties to an Insurance Contract to be aware of the details of that Contract. Insurance companies are not licensed to provide advice and can only explain their product features. They do not advise on the suitability of the cover for a business.