General Third Party Liability
Who is the insurance intended for?
This insurance is intended for legal entities, sole proprietors and individuals carrying out specific activity.
What risks does the insurance cover?
The cover comprises the insured person’s (including managing bodies of the insured, their substitutes and members of collective managing bodies, as well as the employees of all staff categories working under employment contracts) third party liability for property and non-property damages caused to third persons during or in relation to carrying out an activity.
The cover is specified in the following clauses:
- Employer’s Liability clause: this clause covers the insured person’s liability in their capacity of employer in relation to the compensations they should pay under the Labour Code to their workers and employees for damages due to occupational accident that has occurred during the term of validity of the insurance or in relation to the performance of work assigned by them or of any kind of work performed without their instructions but in their interest, as well as during the break time in the enterprise. It also covers the insured person’s liability when the occupational accident is caused by insurmountable force (force majeure).
- Liability for the Activity clause: this clause covers the insured person’s liability for damages to property and/or body injuries (including death) of third persons caused by them as a result of or due to the carrying out of the insured activity, as well as due to the possession, management and use of premises.
- Liability for the Product clause: this clause covers the insured person’s liability for body injury (including death) and/or damages to third persons’ property caused by their products. The insurance premium depends on the amount of the sales turnover and the type of the products, the territorial scope of the cover, the agreed deductible and the chosen limits of liability.
- Tenant’s Liability clause: this clause covers the insured person’s liability for any property damages caused by them to buildings and/or premises used by them by virtue of a lease contract.
- Hotel and Restaurant Manager’s Liability clause: this clause covers the insured person’s liability for property damages and/or body injuries (including death) suffered by their clients and/or visitors that have occurred as a result of services provided by them falling within the scope of the hotel and/or restaurant management business in their own or leased site.
- Third Party Liability related to the Possession and Use of a Firearm clause
The insurance is intended for:
- Legal entities and sole proprietors carrying out security activity with the use of fire arms;
- Employees of legal entities who use fire arms for security activities;
- Individuals who use fire arms for self-defence;
- Other individuals and legal entities that possess and/or use fire arms for cultural, hunting and sports purposes.
This clause covers the third party liability of the above persons for any property and non-property damages caused by them during the term of validity of the insurance, in relation to the use of fire arms for carrying out security activity, security and self-defence.
- Transport Companies’ Liability clause /to verify financial stability/ Insured persons may be individuals and legal entities registered as traders who hold a license for carriage of passengers and cargo.
The availability of such insurance is required by Regulation (Р•C) No. 1071/2009 of the European Parliament that stipulates the amendments in Ordinance No. 11 of 31.10.2002 on international road carriage of passengers and cargo and Ordinance No. 33 of 03.11.1999 on public transport of passengers and cargo on the territory of the Republic of Bulgaria.
- Individuals’ Liability clause:
The cover under this clause relates to the insured person’s liability in their capacity of head of family, employer of individuals working in the household, owner of domestic animals and bees, a person practicing sports activities.
Breaking Down Your Insurance Policy: Third-Party Liability Coverage
Life is full of risk.
Slips, falls, and car accidents are very common and can lead to huge medical bills, lawsuits and the poorhouse if you aren’t properly protected by insurance.
A major part of insurance protection is third-party liability coverage, which will respond on your behalf if you manage to hurt a third party or damage their property.
Not sure what third-party liability insurance is? Read on to learn everything you need to know about this essential insurance.
What is third-party insurance?
Basically, third-party insurance is liability coverage that’s purchased by a consumer (first party) from an insurance company (second party) to protect against claims from other people (third party) for injuries or damage the first party causes.
Third-party insurance comes bundled into standard homeowners, renters and many business policies and is required as part of your car insurance in every state in the country.
Why do I need it?
Risk is everywhere, and if you (or your house, your car, or your business) manage to cause bodily injury or damage to a third party or their property, you could be on the hook for some serious damages, and there’s the chance that a lawsuit might follow.
Litigation is very common these days. If you’re on the wrong end of a lawsuit, you’ll be looking at some serious expenses for both legal defense and any resulting judgments or settlements.
Car crashes happen every second of every day. According to the National Highway Traffic Safety Administration, an estimated 2.31 million people were injured in motor vehicle crashes in 2013.
Falls and slips are very common and can result in very expensive claims. According to statistics from the National Safety Council, the average claim cost in 2009-2010 for a fall or slip was $41,393 making it the second most expensive claim after motor vehicle claims.
Regardless of whether you‘re at fault in a car accident or someone trips and falls at your house, you can be held liable. Liability coverage can protect you in certain situations.
Common types of third-party insurance coverage
There are two different types of third-party coverage for auto insurance, and they’re both required in most states.
Bodily injury: This type of coverage is mandatory in all states and covers another person’s physical injury due to an accident that you’re responsible for. Coverage extends to their actual physical injuries, pain and suffering, and even death.
Bodily injury coverage is written with two limits: the first applies to each person; the second is related to each accident. As an example, minimum recommended coverage levels are usually $100,000/$300,000, which translates to policy limits of $100,000 per person in an accident and $300,000 total per incident. Required coverage levels vary by state, but can be as low as $10,000/$20,000, which is hardly sufficient for a serious accident.
Bodily injury covers the following costs if you’re liable for an accident:
- Medical expenses: It not only covers the cost of emergency services, hospital care, and follow-up visits, it also covers the costs of wheelchairs, walkers and crutches, if necessary.
- Legal fees: Lawsuits happen after an accident, and if you were responsible for the crash, you could be sued. Liability coverage also includes the cost of your defense and any judgments or settlements up to policy limits.
- Lost income: If the driver you hit is seriously injured, they may need physical therapy or be unable to work for weeks or even months. This loss of income would be covered by your bodily injury liability coverage up to policy limits.
Property damage: This type of third-party liability insurance helps pay for any damage you do to another person’s property with your vehicle. While it’s usually the other person’s car that’s damaged in an accident, it can also cover other property such as trees, fences, mailboxes and even garages.
This is required coverage, but like bodily injury, required coverage levels vary and can be as low as $10,000. Most experts recommend carrying at least $50,000 in property damage.
It is important to remember that third-party insurance like bodily injury and property damage is solely for the benefit of a third party, it’s not designed to cover your medical bills or pay to repair your vehicle.
While the main point of renters insurance is to protect your belongings in the event your apartment or rental home is damaged or destroyed, these policies also offer third-party liability coverage.
The liability portion of the policy helps cover bodily injury and property damage claims for injuries or damage that happen to third parties in your apartment, or even as a result of your normal activities away from home. A slip, fall, or dog bite can result not only in medical bills that have to be taken care of, but also the possibility of a lawsuit.
Coverage is restricted by the policy limits, so make sure you have a complete understanding of your limits. Low limits can leave you on the hook for the balance if you are sued.
The property damage portion of the policy pays for damage to your neighbor’s property. As an example, if one of your children boots a football through a neighbor’s window, the repair costs will be covered.
Homeowners insurance not only pays to repair or rebuild your home and replace your property, it also offers third-party coverage. Just like renters insurance, homeowners coverage offers third-party protection against liability claims and covers medical costs, lawsuits, pain and suffering, lost wages and even death benefits.
Here is a quick rundown of the various benefits offered by homeowners third-party coverage:
- Medical bills: Just like car or renters insurance, third-party liability can help cover the medical bills of someone who is injured on your property. If a person slips on a snowy sidewalk, falls down your stairs or is attacked by your dog, you may be responsible for the medical costs.
- Pain and suffering: If a court awards pain and suffering damages to someone injured in your home, the liability portion of the policy can cover these costs.
- Lost wages: If the injury sustained in your home prevents that person from working, you can end up legally liable for their lost wages. Liability coverage can also cover these expenses.
- Legal defense: The cost of legal defense if you’re sued can be enormous. Luckily, the liability portion of your homeowners policy pays these bills in addition to the policy limits.
Business owners policy
A business owners policy combines a variety of coverages into one policy that offers comprehensive protection to business owners. One of the major components of such a policy is third-party liability, which protects your business should it cause harm to others. This coverage not only applies to customer slips and falls in your store, but also to damage from defective products, incorrect installation and harm caused by one of your employees.
A personal umbrella policy is all about third-party liability. It kicks in when you reach the policy limits on your auto, homeowners, renters or even condo policy. It is basically a big bucket of extra liability protection.The cost of a lawsuit can quickly spiral out of control, and having an extra layer of protection can be a financial lifesaver.
The great thing about umbrella policies is that they offer loads of liability coverage at a very reasonable price. Premiums can vary, but expect to pay roughly $150-$250 per year for $1 million in coverage.
Where can I get third-party insurance?
This coverage is bundled into many policy types, so there’s a good chance you already have some third-party liability coverage in your auto, home or renters insurance.
One important thing to remember is that liability coverage only pays out up to the policy limits, and setting the right limits is extremely important with third-party liability insurance. In almost all cases, state-required minimums for auto insurance liability aren’t sufficient to protect your assets.
The same can usually be said of homeowners insurance. Most standard policies come with $100,000 to $300,000 in liability coverage, which sounds like a lot but will quickly be eaten up if an accident happens.
Hospital bills, regardless of whether for a car crash or someone falling down your stairs, can easily reach $100,000 within days if the injuries are serious, so it’s essential to carefully consider your liability limits. Raising your liability limits is always a good idea, and in most cases it’s very affordable.
Adding an umbrella policy is also an inexpensive way to bump up your third-party liability coverage.
Trusted Choice® agents can help you determine what third-party liability coverage levels you should be carrying to ensure that your assets are completely protected in the event of an injury or lawsuit. Talk to a local agent today.
Professional Liability Update- Third-Party Liability
As you probably are aware, as many as 60-65% of all professional liability claims against architects and engineers are filed by clients. The obvious costs of these claims is significant. But the not-so-obvious costs, including the value of the billable time spent, and the loss of what could have been a client for life, can be larger still.
Given clients’ propensity for filing claims, you need to be diligent when it comes to client selection. Invest the time and energy required to educate clients and thereby earn their trust and respect. Client trust and respect can be gained, in large part, through an effective contract formation process.
Third-parties account for the remaining 35-40% of professional liability claims (about half of which are filed by contractors). Once again, an effective contract can significantly reduce the likelihood of a problem.
To attain an agreement that can effectively reduce the likelihood of third-party claims, you need to meet with the client and explain how a number of contract provisions can lower your third-party liability exposure as well as the client’s.
Reports and Studies
When you have been engaged to conduct research and issue a report or study, be it a soils report, evaluation of an existing building or structure, etc., third-parties are likely to rely on what you provide. In some cases, you won’t know they have done so until after the fact, when damages are alleged and a source of recovery is sought.
To reduce your exposure (and your client’s), you could physically include a copy of your contract with the owner as an appendix to the report to indicate specifically the scope of services involved and the nature of your agreement with the client for whom the service was performed.
Third-parties sometimes file a claim because, somehow, they think they are beneficiaries of the contract between you and your client. For that reason it can be beneficial to include a third-party exclusion in your general conditions.
This provision states that the agreement does not create any right or benefits for parties other than the consultant and the client. While the provision cannot prevent third-party claims, it makes them far more difficult to take forward, and even tougher to win.
Third-party reliance on a report is a well-known problem in the environmental field. It can also be a problem for design professionals if, for example, you evaluate the structural integrity of a building or some other structure, only to have your client sell the property and use your report as part of the sales package. The scope of service you implemented on your client’s behalf may not have been the scope that a third-party would have preferred.
To reduce its liability, your client needs to communicate to a prospective purchaser the importance of conducting its own study. For that reason, your agreement should include a third-party reliance provision that forbids any party other than the client to rely upon your report unless you give explicit permission for it to do so.
Wording about third-party reliance should be included in any report you develop, and as noted above, it may be wise to include your agreement as an appendix.
Conversion – While you owe a duty of care to residents of any apartment communities you design, the duty of care you owe to owners of condominium units is far broader. Only the owner of the apartment building would be in a position to instigate a claim on the grounds that an error or omission on your part led to an unanticipated expense.
By contrast, each and every owner of a condominium unit could file such a claim against you, and generally speaking, unit owners are far more sensitive to construction defects, far quicker to rely on litigation, and in a far better position to win at trial.
While conventional contract protections, such as a limitation of liability provision, still would be appropriate in your contract with the owner/developer of an apartment project, recognize that unit owners – not your client – would be the most likely claimants if that apartment building were converted to condominium ownership.
Accordingly, if you are engaged to provide services on an apartment project, consider including a condominium conversion clause that states that your client does not foresee conversion of the building to condominium ownership.
That provision itself might be sufficient to block a suit against you in the event that the building is converted to condominium ownership at some later date. (You are liable only to those parties who might foreseeably be damaged by your negligent acts, errors or omissions.) Such a provision can be found in the DPIC Companies’ Contract Guide.
Maintenance – Condominium developers are also at risk of lawsuits filed by unit owners who face unanticipated costs. In many cases these costs occur not because of inadequate design or construction, but solely because condominium management has not effectively maintained the building and its equipment.
You can therefore help the client by including a provision in your agreement requiring your client to include a maintenance requirement in the condominium’s by-laws, causing the condominium to waive any claims against the developer, consultants, and contractors for failure of equipment or materials that are not properly maintained.
Claims brought against owners and their design consultants are frequently filed by contractors, or they are filed by third-parties whose damages were caused by contractor error. You can help prevent claims of this nature by offering a variety of services that should be included in your agreement’s scope of services. Because these services are likely to increase your client’s short-term expense, you have to educate your client about the long-term sav- ings that might be involved.
Contractor pre-qualification helps ensure that the contractor that is selected has the experience and reputation required to perform well. That in itself can help prevent problems, and you are likely to have the kind of relationship with such contractors that will make it relatively easy to work out problems that do arise.
Contractors that obtain work on an open bidding basis are sometimes unfamiliar with local conditions or the full scope of services that may be required, or they may be buying into a contract in hopes of making a profit through change orders and/or well-documented negligence claims.
Pre-bid meetings can help ensure contractors’ questions are answered and help remove some of the gamesmanship that can otherwise occur. Only you are in the best position to answer questions about your portion of the work.
Pre-construction meetings can help ensure solid understandings between the contractors and design professionals involved, so people know when they will be needed and why.
Construction observation – not just occasional visits to the site – are essential, because a construction observer can spot problems that others do not see, or can at least deal with problems while they are still in their “molehill” stage. The documentation that results can also help discourage a contractor from filing a suit, if only because it would create a no-win situation.
Shop Drawing Review
In many states, third-parties cannot successfully file a negligence claim when the losses are purely monetary (e.g., as a consequence of delays). In other states, where third-parties can sue for purely monetary losses, delay claims by contractors are becoming more common. A typical method used by unscrupulous contractors is to inundate consultants with shop drawings, causing a slow-down in the review process.
Other problems can arise when shop drawings differ significantly from what was called for, but such differences are not called to your attention.
You can use a contract provision to bring this problem to your client’s attention, to help ensure client support in developing effective shop drawing review procedures. In essence, you should identify specifically which shop drawings you want to see, require the contractor to review and approve each before you see it and to call to your attention any that would represent a change.
By adhering to requirements, you can help prevent shop drawing review from becoming a profit center for those who intend to misuse the process.
Diminution of Value
Diminution of value can be a serious problem to conditions surveys of any type. When the subject property is being considered for purchase by your client, your finding of a hitherto latent problem would cause the property to lose value.
When you seek the protection for this third-party exposure in your agreement, as through an indemnification provided by your client, you can bring the issue to the surface. Your client can then seek protection from the property owner, requiring the latter to agree to waive any claim brought about by a finding that makes a property less valuable.
When it comes to conditions surveys or forensic work, you need to ensure that you have a legal right to enter onto property not owned by your client. Otherwise, you could be faced with trespassing charges or worse, such as a claim that your forensic evidence was gained through unlawful means.
Be certain that the necessary permission is obtained, and that (when appropriate) the property owner is advised that the work you do may involve some property damage. The client should be responsible for this activity.
Limitation of Liability
Limitation of liability provisions can be written in such a way that the claims filed by a client and the client’s contractors may not exceed a certain fixed amount. In fact, this type of language was in common use during the 1970s and much of the 1980s. As design professionals pointed out to their clients, contractors who were aware that such a limitation was in place were far less likely to attempt project buy-in with the idea of filing claims later in order to make a profit.
Various documents, such as those used by lenders, require design professionals to certify that certain conditions have been met. Unfortunately, the word “certify” can be taken to mean “guarantee,” and to guarantee the existence of conditions whose existence cannot be verified is dangerous. Making it even more dangerous is the fact that problems resulting from certified conditions not actually existing have nothing to do with negligence. As such, your professional liability insurance may not cover you for any such losses.
Your client should care because, if you lose your deep pockets, chances are the claimant will come after the client, the party that caused you to sign a document that resulted in your loss of insurance. By calling the issue to the client’s attention by means of a contract provision, the client should be far more anxious to explain the situation to third-parties who seek a certification, since your signing one could increase the client’s risk.
Claims filed against you by injured contractors’ employees are among the most common third-party claims. They arise because design professionals are among the few parties available to sue, given that workers compensation laws shield contractors, and owners typically have nothing to do with what happens at a site.
In order to forestall such suits, and to permit you to reduce or eliminate any contingency allowance, you should make it clear in your agreement that you have nothing to do with the means, methods, sequence, procedures, techniques or scheduling of construction. Point out that these functions are vested solely in the contractor.
Ideally, the contractor agrees to hold you harmless unless and include an indemnity provision in the agreement between the owner and the contractor. You should be included as an additional insured on the contractor’s policy.
While it may be somewhat of a surprise to you that an effective contract can be of such value in reducing your third-party exposures, recognize that you will be in a position to obtain such an effective agreement only if you have a good relationship with your client – the same kind of relationship that can encourage your client to work out problems, rather than resorting to litigation or arbitration.
Recognize, too, that good relationships with contractors in your area can also be a major deterrent to litigation and arbitration.
Disclaimer: This article is written from an insurance perspective and is meant to be used for informational purposes only. It is not the intent of this article to provide legal advice, or advice for any specific fact, situation or circumstance. Contact legal counsel for specific advice.