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Personal liability risk and insurance while working from home

The COVID-19 crisis has brought with it many changes that are likely to remain long after the pandemic fades away. Working from home, for example, has become the new norm for many of us even if only for part of the time. It is normal to protect and insure our assets whether we rent or own a home or use a vehicle to get to work or not. Yet, the possibility of being held legally responsible for an accident or incident usually comes in second to the loss of an asset, even though it has the potential to cost us far more at the end of the day. Whether you are successful in defending yourself or not, just the legal expenses doing so can be financially devastating.

Fortunately, insurance is available to cover both your assets and your personal responsibilities, should you be held legally liable for the accidental death or injury to a person or accidental damage to or loss of another person’s property. Depending on your individual circumstances though, you may need more than a personal policy providing legal liability cover, especially if you work remotely. Specific purpose business insurance is available to provide protection that an individual product either excludes, warrants, limits or omits.         

There are some general rules about personal liability to ensure that you are not compromised in any way:

  • Never admit to a third party that you were at fault
  • Never offer to pay or settle their claim against you
  • Never make any promises to anyone relating to an event or incident

Doing so may open yourself up to claims against you and you may have less responsibility than you think. Your insurer may have limited ability to negotiate with other parties and has the right to reject your claim because of this. Remember to also inform your insurer of an incident as soon as possible, but no later than 30 days.

The golden rule when dealing with any incident, is to obtain as much information regarding the event and parties involved in the event as possible. Independent witnesses or photographic evidence can be extremely helpful.

Other examples of situations or changes in your personal circumstances affecting personal liability covers are:

Airbnb – Most, if not all, personal policies exclude cover for homes that provide accommodation for financial gain. Owning or renting a home creates a legal responsibility for any related injury or damage to other parties and their property. Liability for financial losses to others arising from defects in the house, a faulty appliance or even a fire that spreads to neighbouring houses, will leave the homeowner or tenant liable but uninsured if operating for financial gain at the time of the incident. There are bed and breakfast and other hospitality business insurance products designed to cater to Airbnbs and the like. Limited cover under your personal insurance, may be offered by some insurance companies at an additional premium.

Businesses operating from home – Personal legal liability related to your business or profession can be included in your home insurance policy, at an additional premium. Your home must mainly be used for residential purposes, for example, a business comprising offices, consulting rooms or home industry with a limited number of employees. Be sure to check with the insurer or your broker for terms and conditions and let them know if you have moved equipment from your work to home, as this may be material in their assessment of a change in risk. Operating any kind of educational facility is always an exclusion on a personal policy, and education-specific insurance products are designed to provide the unique recommended liability extensions.

Any advice or treatment of a professional nature at the home is also not covered. A professional person may be legally responsible for errors and omissions that result in negligence claims for financial losses incurred by third parties. These and legal defence costs are covered by professional indemnity insurance.

Cyber liability covers you for internet-related risks, resulting in legal and other costs where there is a breach of confidential information causing losses to others, by way of failure to safeguard data, defamation, etc. There is also no personal liability protection if you are held responsible for any repair, goods sold, supplied or damage or defect caused to any property you have worked on or any contract to perform work. Consumer protection legislation applies no matter whether you are a manufacturer, repairer or seller, and you can be held liable anywhere you find yourself in the supply chain. General liability extension of covers, as well as engineering and surety/guarantee business products, are designed to cover you for any legal responsibility you may incur.

Trusts and close corporations – If you are part of a trust or close corporation, you will need to arrange separate business insurance coverage to cover any liability to beneficiaries, directors and trustees. 

Motor liability to third parties – This relates to legal responsibility for accidental death or injury and/or accidental damage to third-party property. A claim may be rejected in its entirety for both own damage and liability cover if policy terms and conditions are not complied with. For example, you are obliged to inform the insurer or your broker of changes to the regular driver of the vehicle (which affects the premium and excess structure). If the vehicle was rated on ‘social’ use only and changes to ‘private to and from work’ or ‘business use’ without advising the insurer, this may compromise your liability cover. Commercial ‘goods carrying’ use is not permitted. A personal motor policy is intended to cover you, your spouse and immediate family living with you, but also extends to include any licensed person driving the vehicle with your permission. However, liability cover only extends to that person if they do not have any liability insurance of their own.    

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