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Financial Losses - Claims your PL insurance won't cover

Published by System Admin at 1/30/2022, 6:00:00 PM

FoundationsIf your business is ever unfortunate enough to receive a letter of claim from a third party alleging you have caused them a financial loss it may be easy to assume you can just send this on to your PL insurers to deal with.

However Public and Products Liability insurance covers losses arising from third party injury or damage - if there has not been any injury or damage caused then the loss would not automatically be insured.

If, for example, a contractor laid defective underground services and they needed to be dug out to be repaired there has not been any damage to third party property - the loss is purely financial.

Another example would be if a manufacturer provided a machine component to a customer which was discovered to be of incorrect specification, and as a result caused the customer to have to withdraw the machine and replace the part, potentially losing out on profit due to being unable to fulfil a contract of sale. Again, there has been no damage or injury caused and as a result no cover under a standard PL insurance policy.

In both of these instances it would be possible to secure cover by obtaining a PL policy which includes a Financial Loss extension.

Depending on your trade, you may also give your customers professional advice or specifications.

If a customer was to contact you to ask for you to supply them with a machine for carrying out a specific task or for you to design and construct an element of a property, and further down the line they allege to have problems with the solution you have provided which will incur substantial cost to put right then in the absence of an injury or property damage it is likely that there would not be cover under your PL insurance.

In this instance you ought to consider Professional Indemnity insurance, which can provide wide coverage including financial losses wherever there has been advice, design, or specification included within a job.

For more information or to have an informed discussion about your requirements please get in contact.