Liabilities: Where to start?

By: Warwick Goldie, managing director, ITOO

Local and international news channels are buzzing with the latest global cyber-attack – a ransomware outbreak now named PETYA is the latest such global attack to do the rounds and has already compromised thousands of networks across the globe.

Who would have thought that another global ransomware attack would follow so soon after the WannaCry outbreak? You can never be prepared enough!

Liabilities occur daily. They arise out of normal business activities. They are always unexpected, are at times unquantifiable and occur even in best-of-the-best businesses. So, how do you, the broker, understand liabilities, improve your knowledge and convey your learnings to your clients?

Discussing all forms of liability exposures with your client is a start. These are a few of the critical ones:

CYBER EXPOSURES
WannaCry and PETYA are topical, recent and real! Every business is at risk from ransomware, hacking, network breaches etc. All businesses, no matter what size, have IT systems, which puts them at risk. What do they do, who do they contact if their network is breached or their data stolen?

Cyber insurance is a starting point covering first party exposures as well as potential third party liability. The policy will assist in managing the entire process – and with POPI soon to become effective, may even pick up fines and penalties incurred under that Act.

COMMERCIAL CRIME
Surveys reveal that employees steal approximately 5% of a company’s turnover annually. If your clients don’t believe this, it’s because they haven’t discovered the theft! A commercial crime policy offers a solution, protecting your clients and their balance sheets from catastrophic employee theft.

D&O In every business, tough decisions need to be made by directors on a daily basis. What protection is there for them? A directors and officers liability policy is one such tool.

The decision to purchase D&O insurance should be automatic. Who will be there to assist in running, managing and defending a director when an action – whether frivolous or real – is brought against them for incorrect decisions made? Can a director afford the time and money to run their own defence for years and incur millions in defence costs? This is where a good D&O policy will come into its own.

BROADFORM LIABILITY
All businesses own property and sell some form of product or service. Even though these products, services or premises may seem benign, they could still attract liability to third parties. Bodily injury or property damage to third parties can be caused by even the simplest of offerings.

With strict liability attaching in terms of the Consumer Protection Act, or liability attaching in terms of common law, a business could be held responsible for sizeable costs, damages and awards if its product actually or allegedly causes such harm.

Furthermore, slip and trip accidents can give rise to liability damages and awards. So what is the business solution? Broadform liability coverage. As with all other liability products, the defence and costs associated with a valid claim is covered by the policy.

PI/E&O
As humans, we all make mistakes. For professionals, service providers and advice givers, making mistakes can be expensive. A professional indemnity/errors & omission policy covers the costs incurred, as well as damages and awards granted against a business, as a result of an error or omission, or a breach of professional services.

Design errors, construction errors, financial advice mistakes, advertising mistakes, non-disclosures when required, attorneys who miss prescription deadlines, incorrect IT programming, liquidator errors, misrepresentation by estate agents, incorrect advice by insurance brokers, errors by insurance brokers – these are a small sample and examples of where liabilities may occur unintentionally in the course of a typical business day.

Remember, none of these policies substitutes for controls and procedures within the workplace. They should be seen as risk management tools of last resort.

In closing, we cannot ignore the wide range of liability exposures that businesses face every day. A business without liability insurance is a business that is potentially facing one claim that could lead to financial disaster!