Understanding contractors insurance - what's essential

There are 3 fundamental covers to any contracting insurance programme which include: public liability, products liability and professional indemnity. As a contractor, it helps to understand the purpose of each. Without the correct insurance in place, you could find yourself liable for any number of claims that could set you back more than just money.

Public liability

Having public liability insurance means you are covered when a member of the public is injured or damage is caused to, or at the premises where you are working. Examples may include the following:

  • Injury – if someone makes a claim against you for slips, trips or falls
  • Accidental damage – from damaging fixture or fittings to a burst pipe
  • Legal cover – if you have to go to court or need a solicitor

Products liability

Products liability covers you in the event that someone is harmed, or property is damaged due to products that are sold or supplied by you.

Inefficacy cover can also be included within this to provide cover for any loss or damage to property caused by a product not working the way it should.

Professional indemnity

Professional indemnity insurance covers any financial loss caused by flawed design work or improper advice, as opposed to accidental damage covered by public liability insurance.

How does this affect you and your business?

Without the appropriate insurance in place, there are financial risks in the event of a liability claim. However, it’s not only financial losses that should be cause for concern.

If claims for damage or injury are not dealt with in a timely fashion, or if further legal action is taken in order for the client to recuperate their losses, your business’s reputation could be damaged.

Consider the following three scenarios where the insurance products mentioned above provide protection and defence. Do any of these scenarios sound familiar?

Scenario 1

Moving items of furniture at your client’s premises in order to gain access to the area you need to work.

What could go wrong?

You are working at a client’s property and move a sofa to gain access to sockets on the wall. However, you accidentally knock over your client’s television in the process, resulting in the television being damaged beyond repair. If you don’t have insurance, you would be personally liable for the cost of the damage.

What insurance could protect you in this scenario?

As accidental damage was caused to a client’s property, this would be a public liability claim and all costs of damage would be covered by this insurance.

Scenario 2

Installing fire and/or security alarms on a client’s premises.

What could go wrong?

You install an intruder alarm at a client’s offices. Several months later the client’s offices are broken into and £30,000 of stock and computer equipment are stolen.

The intruder alarm ‘failed to perform’ resulting in your client demanding compensation from you.

What insurance could protect you in this scenario?

The product has failed. This claim would be covered under the inefficacy extension of the products liability insurance.

Scenario 3

Providing design specifications and designs for a client.

What could go wrong?

You design a lighting system for a client for their new office. However, the specification and design has a flaw, which results in additional costs to your client, as well as delays to the project. Your client takes action against you to recover their losses.

What insurance could protect you in this scenario?

This claim was a result of a professional error and would therefore be covered by professional indemnity insurance. Any resulting legal costs and awards incurred as a result of this error would generally be covered by this insurance.

These are every day incidents that could occur for an electrical contractor. Without the proper insurance, any one of these claims could result in considerable personal costs and permanent damage to your business reputation. It’s also worth noting that there are many other elements of cover within a contractors insurance package, and taking the advice of your broker on what you are likely to need is advisable.