Insurance Words

• LEGAL LIABILITY

A legal liability is a liability arising from the operation of the law, creating an obligation on the part of the person to compensate another for injury or damage sustained by that other. The liability may arise either in tort, in statute, or in contract. In Tort, the liability arises out of a breach of the duty of care which a person owes to all other people. In Contract, the liability arises out of a breach of an obligation which one person owes to another with whom the contract is made. In statute, the liability arises out of a breach of a statutory duty.

• LIABILITY IN CASE OF INCIDENT

The matter that commonly concerns most outdoor users is their exposure to legal liability arising from an accident causing injury to participants involved in an activity. To establish this we need to understand the legal framework in place that deals with such matters. The law is divided into two separate and distinct areas: Civil Law and Criminal Law.

• CIVIL LIABILITY

Civil Law provides for the compensation in matters where there are accidents causing injury. It is concerned with assessing fair compensation in terms of the pain and suffering that the injured party experienced through the fault of another person. Damages when awarded to the injured party are monetary damages paid by way of compensation.

In most cases where an outdoor organisation is found to be liable, it is in the area of civil liability. Civil liability arises when the organisation, leader or participant is deemed to have acted contrary to, or failed to act as, an ordinary, reasonable and prudent person would have in the same situation.

• CRIMINAL LIABILITY

Criminal Law is concerned with acts that are deemed so serious that they are criminal in nature. It is conceivable that as the degree of negligence increases you can cross the line from civil to criminal negligence, to a situation where the court views the actions or conduct of the party at fault to be so grossly culpable that criminal proceedings may be brought against the party at fault. Whereas, civil liability usually deals with the award of compensation to the injured party, criminal liability can give rise to penalties imposed on those deemed culpable including both the sponsoring organisation and the individual participant.

Organisations and Clubs must provide such necessities of life as to prevent the participant’s death or impairment of health or well-being. Further, the organisation or club has a responsibility to take all reasonable precautions to avoid danger to human life. Anyone who negligently fails to fulfil these duties may be criminally liable. While rare in the outdoor industry, the prospect of criminal liability should be considered.

• NEGLIGENCE

Before a person can be found to be liable in either a civil or criminal context, they must first be shown to be negligent. To establish negligence it must be proved that the four premises of negligence were present, and took place. The four premises are as follows:

• • 1. Duty of care must be owed to both the participants in the activity and any third party who may be affected by the participant’s actions. Undeniably, organisations and leaders of outdoor activities owe a duty of care to their participants regardless of any legal form they may have signed prior to participating.
    2. It must be shown that there was some kind of breach of that standard or duty. Such a breach can be either an act or an omission, which is contrary to that of the perceived behaviour of the reasonable, prudent person.
    3. The breach must lead to an injury: real physical and/or psychological damage that is legally recognisable and compensatable. It must be shown that the negligent act contributed or led to the injury.
    4. The injury that was occasioned and the damage that occurred must have been reasonably foreseeable, example the type of accident and damage which occurred must have been of such a nature that an ordinary person could have reasonable foreseen it.

In summary, you are negligent if you owe a duty of care which you breach, that results in a foreseeable accident causing injury to one or more participants or to a third party.

• INSURANCE FOR LIABILITY

Liability insurance policies offer protection to all persons who may incur a legal liability and not just in terms of liability of an organisation or leader to an injured participant. The different types of policies available provide indemnity to the insured for his or her legal liability which may arise at common law, under statute or under contract. There are many different types of liability policies. Cover may be provided in a policy covering one particular type of risk or in a ‘combined’ or ‘package’ policy offering protection against several eventualities. The organisation must be aware of the risks that they should be insuring for, and the type of liability to cover them.

The policies considered below fall into two main groups: Compulsory insurance and optional insurances.

Compulsory insurances are those which are made compulsory by statute. Option insurance are those were the obligation to insure is not imposed on the insured by law.

There are, however, instances where to insure is assumed or imposed under contract. For example, in contracting with the NSW National Parks and Wildlife for access and usage of their parks, it is required that the commercial operator takes out public liability policy which is classed as an optional insurance.

The basic cover offered by each class of insurance is summarised in brief below.

Compulsory

• Employer’s Liability

policies in this class indemnify the employer in respect of his or her legal liabilty under workers’ compensation legislation and at common law, to employees who sustain bodily injury or disease arising out of or in the course of their employment.

Compulsory Third Party – policy that protects an insured against his or her legal liability in respect of death or bodily injury to a person arising out of the use of a vehicle. In most states, this cover is compulsory before a vehicle can be registered.

Optional

• Public Liability

policy indemnifies an insured in respect of his or her legal liability to third parties for death, bodily injury (including illness), and for any loss or damage to property which happens in connection with the conduct of the business insured under the policy.

• Products Liability

policy protects the insured against potential losses arising out of the defective nature of goods manufactured or supplied by his or her business. It indemnifies the insured in respect of the legal liability to third parties for death, bodily injury (including illness) and for any loss of damage to property caused by or through the sale or supply of any commodity, article or thing in connection with the business under the policy.

Products Guarantee – policy indemnifies the insured in respect of legal liability for claims arising out of the failure of products to fulfil their intended purpose. The claims may relate to the intended purpose, the repair or replacement of the faulty products themselves or to a consequential loss sustained by the user of the faulty products.

Products Recall – policy indemnifies the insured for expenses incurred in recalling a defective product that has already been put on the market and is subsequently found to possess a dangerous fault.

• Personal Liability

An individual in a private capacity has a liability for his or her acts of negligence. Everyday pursuits can cause accidents and the person liability insurance is intended to protect the insured and any family member normally in residence in respect of their legal liability to compensate third parties for any injury or illness to persons, and loss of or damage to property arising out of their private activities.

Professional Indemnity – Most public liability policies exclude liability for professional negligence. The purpose of professional indemnity is to indemnify a professional in terms of his or her legal liability towards third parties for injury, loss, or damage, arising from her or her own professional negligence or that of his or her employees. Claims against firms or persons for professional negligence do not necessarily arise from accidental injury of or damage to property within the meaning of an ordinary public liability policy. They are usually the result of other negligent acts or the negligent giving of advice.

• Directors’ and Officers’ Liability

policy generally indemnifies the directors or officers in respect to claims made against them from any wrongful act committed in their respective capacities as directors or officers of the organisation. 

• Umbrella Liability

This type of cover ‘sits over’ the insured’s liability program giving overall protection. It expands on the policies already held by the insured by indemnifying them for:

• • • excess liability over existing covers
    • a difference in conditions of cover – as the umbrella policy has few exclusions, cover is provided in areas where the underlying policy has an exclusion but the umbrella policy does not.