Every business faces some level of risk, which is why most businesses need liability insurance. This coverage can help protect the business from claims, like malpractice or bodily injury, that could end in lawsuits or legal liabilities.

The level of coverage changes on the type of business because every industry has unique risks. For instance, construction businesses may require coverage with superior liability limits than retail stores. There are also unique types of liability insurance coverage one needs to consider when looking for a policy.

Directors and Officers Liability Insurance protects Officers/Key Managerial Personnel (KMPs) by covering their past, present, and future of an organisation. Liability Insurance provides claims against directors, officers, employees in the event of any actual or alleged unintentional error, misstatement, omission, misleading statement, or breach of duty.

Any claims that an employee, the client makes, and stakeholder, against Directors and officers/ KMP of the Company is considered under liability insurance.

Choosing the right Liability Insurance

Various types of liability insurance are available in the market, catering to different needs and requirements. Those are:

Public Liability Insurance

Public Liability Insurance Act, 1991 requires compulsory public liability insurance for institutions handling hazardous substances to make available minimum relief to victims of accidents, other than employees.
There are types of Public Liability insurance policies – Industrial and Non-Industrial Risks.

Industrial Risk Policy
Cover the risks arising in manufacturing premises including godown, warehouses etc., forming part thereof.

Non-Industrial Risks Policy
Comprise of risks arising out of the following establishments:
  • Hotels, Motels, Club Houses, Restaurants etc.
  • Cinema Halls, Auditoriums, and similar public places.
  • Residential premises.
  • Schools, Educational Institutions, Libraries.
  • Exhibitions, Fairs, stadia.
  • Amusement parks.
  • Film studios.
  • Depots, Tank farms, Warehouses, Godowns, Shops, similar other non-industrial risks.
Scope Of Coverage
The coverage under the Insurance includes.
  • Legal liabilities
  • Other than liabilities under the Public Liability Insurance Act or any other law
  • Compensation including the claimant's costs, fees, and expenses.

  • Abhivridhi Tip

    Business dealing with hazardous substances per the Public Liability Act, 1991, needs a mandatory Public Liability Insurance.

    Commercial General Liability (CGL) Insurance

    CGL Insurance is designed for business organisations to protect them against liability claims for bodily injury (BI) and property damage (PD) arising out of premises, operations, products, and completed operations; and advertising and personal injury (PI) liability.
    Comprehensive General Liability provides complete protection against:

    • Bodily injury and Property Damage
    • Personal and Advertising injury
    • Medical Expenses
    • Supplementary Payment
    Scope Of Coverage

    • Premises Liability
    • Operations Liability
    • Products Liability
    • Completed Operations Liability
    • Duty to Defend Form
    • Coverage for defence costs apart from damages

    Employee's Compensation (EC) Insurance

    Previously known as Workmen Compensation (WC), Employee Compensation Insurance covers liability that might be imposed on an Employer on account of a fatality or grievous injury to the employee during employment. Employee's Compensation Insurance provides legal liability coverage for such compensation to the employees in case of personal injury by accident or disease arising from out of and in the course of employment.

    Who needs Employee Compensation Insurance?
    An employer who falls within the below categories needs an Employee Compensation Insurance
  • Whether as a principal or contractor, engaging "workmen" as defined in the Employee's Compensation Act.
  • Or Employer of employees who does not qualify as "workmen" but share an employee-employer relationship.

  • Scope Of Coverage

    • Death.
    • Permanent total disablement,
    • Permanent partial disablement,
    • Temporary disablement and
    • Legal costs and expenses incurred with the company's consent.

    Abhivridhi Tip
    Consider taking an Employee compensation policy with additional covers for Medical Expenses, Occupational Disease and Contractors workers/employees.

    Professional indemnity (PI)/ Errors and Omissions (E&O) Insurance

    According to an established discipline, anyone who provides a skilful character's advice or services is a 'Professional. Professional liability arises from a failure to use the degree of skill expected from a person in a particular field. As per Law, professionals are required to perform the services they were hired under the contract terms.
    A wrongful act is established by determining whether a prudent person while exercising ordinary care, would have foreseen the injury or damage that would have naturally or probably resulted from his conduct. A professional's violation of duty towards a client can result in a contract action, a tort action, or both.

    Scope Of Coverage

    • Any civil suit, action, proceeding or demand by any person or entity seeking to hold the insured responsible for monetary damages because of a wrongful act actually or allegedly committed by the insured.
    • Judgments awarded against the insured or settlements negotiated with the approval of the Insurer.
    • Legal fees incurred in the investigation, adjustment, defence, or appeal of a claim.

    Abhivridhi Tip
    Consider taking Add on Covers when you prefer Errors and Omissions Insurance.
  • Employee Dishonesty cover.
  • IPR Infringement liability cover.

  • Directors & Officers Insurance

    Directors & Officers can be sued personally by any stakeholder for a decision taken by them on behalf of the company in their managerial capacity. The D&O Insurance covers two aspects.
    Side A- Legal Liability Brought out on Directors and officers of the company.
    Side-B- Company Reimbursements.

    Risk exposures to Director and Officers
    Direct and Class actions on their behalf

    for labour-related issues such as: a. Sexual Harassment
    b. Wrongful Termination / Promotion
    c. Discrimination
    d. Failure to promote.
    e. Breach of employment contract

    Third Parties
    a. Competitors (Interference, etc.)
    b. Customers
    c. Government (banking law violations, civil rights issues, etc.) or Regulators
    d. Creditors

    Scope Of Coverage

    DD&O Insurance provides indemnity to Directors and Officers for:
    • Legal and defence costs.
    • Damages judgements and settlements arising from claims brought Damages, judgements and settlements arising from claims brought against Directors, due to wrongful acts in their capacity as Director or Officer of a company.
    It becomes a legal liability to pay compensation to a third-party regarding loss resulting from any Wrongful Act committed by Directors and Officers in their capacity as a Director and Officer (including claimant's costs, fees, and expenses) under the Law of the country.

    Abhivridhi Tip:
    Considering Add on Covers / Extensions when preferring Directors & Officers Insurance for the following is a wise choice.
  • Cover for Subsidiaries, Acquiring a new company or Merger.
  • Outside Directorship coverage
  • Cover for Retired Directors

  • Cyber Liability Insurance

    Rising digitalisation of businesses due to Cloud, Mobile, Social Media and IoT, thus, expanding the threat surface. Evolving threat landscape, with the recent ransomware/malware attacks, targeting even the SMB sector, Increasing awareness on cybersecurity Apprehensions around implications of GDPR.
    Cyber Risk can be any risk emerging from the use of information and communication technology (ICT) that compromises data or services' confidentiality, availability, or integrity. The impairment of operational technology (OT) eventually leads to business disruption, (critical) infrastructure breakdown and physical damage to humans and property.
    Cyber risk is either caused naturally or is human-made, where the latter can emerge from human failure, cyber criminality (e.g., extortion, fraud), cyberwar, and cyber-terrorism. It is characterised by interdependencies, potential extreme events, high uncertainty concerning data and modelling approach, and risk of change.

    Scope Of Coverage

    Covers liability for monetary damages sustained by a person arising from the actual or potential unauthorised access to that Entities information leading to
    • Online Business Income Loss
    • Cyber Extortion Expense
    • E-Vandalism Expense
    • Violation of Privacy Notification Expense
    • Covers unauthorised access by employees.

    Find out more on the benefits and implications of having Liability Insurance. Team Abhivridhi Insurance Brokers can help you get the right choice of insurance coverage online.