How much should we insure for is an imponderable matter for most purchasers of insurance and a question we as insurance brokers get asked on a daily basis. In some respects you cannot buy enough cover!
Let’s take your Public Liability policy. You’ll probably have a limit of £2 or 5 million, which sounds like plenty, doesn’t it?
Whilst a good proportion of claims will fall within this limit, its possible that a particularly bad accident could result in a claim eroding this limit quicker than you might expect. In today’s world, litigation costs are increasing rapidly and what many people don’t realise is that the settlement figures take into account the loss of earnings and future medical and care costs of the claimant.
It is therefore easy to see how a £5 million limit could quickly be exhausted.
There is a well-documented case of Agnes Collier which provides one of the most well-known examples of just how high a claim settlement can reach.
Agnes was 13 at the time she was involved in a Road Traffic Accident. She sadly sustained devastating spinal injuries. In reaching the settlement for injuries, the courts considered not only compensation but the cost of care (£270,000 per year) for the rest of her life, as well as the likely loss of earnings for her adulthood – and as a top-grade student at a top public school, again this was considerable. When you add on inflation it is no surprise that her total settlement is expected to reach £23million by the end of her life.
Agnes Collier’s case may be one of the more extreme examples, however it does highlight how high a modern-day accident settlement can be, and it’s highly likely that this will be eclipsed by a case in the not-too-distant future.
While Agnes Collier’s case was a motor insurance issue, it’s easy to see how this could apply to any liability policy. Some recent examples of high-cost claims we have seen as brokers include:
- a sub-contractor for a building contractor walked into the path of a fork lift truck and was rendered tetraplegic – settled at £6.7million
- a number of sub-contractors for an engineering company were badly hurt when the digger they were driving hit a live overhead cable – the claim is reserved at £5million (the policy limit!)
A sobering thought for most businesses should be that any claim that breaches their limit of indemnity would need to be picked up by the company’s own funds and resources.
It’s always worth considering whether your limit of indemnity truly is enough as it is easy to ‘top it up’ with comparatively inexpensive Excess Layer cover. Most insurers now readily offer a £5 million public liability limit and we now recommend a minimum of £10 million to all our clients for the above reasons.