Getting Insurance Right

article3By Kylie Howlett.

Insurance, much like security, is often seen as a grudge purchase, something that you need to pay for but never really want to pay for. However, smart business people know that insurance is much more that a simple compliance cost, it is an essential part of running successful business. In fact, when you get it right, the correct insurance cover can not only save you vast sums of money, it be can actually be the difference between remaining in business or closing the doors, just like having the right security. The question is, how do you know if you have the right insurance cover? Where should you even begin?

Public and Products Liability Insurance
Every security business, regardless of what area of security you are in, should have Public and Products Liability Insurance as a minimum.

Public Liability Insurance covers personal injury or property damage you may cause to a third party while Products Liability Insurance protects you in the event that the product that you supply or manufacture causes personal injury.

You can extend the Public Liability policy by adding the following options:

Errors And Omissions Insurance

This covers you against Errors And Omissions for incidental advice and/or design you provide your customers. A Customer can claim that the service you provided was carried out incorrectly, and that this error cost them money or caused them harm. This insurance is designed to help cover your defence costs and, ultimately, the final judgment if you do not win the case.

In policies that are specifically designed for the Security Industry, Errors And Omissions cover is either automatically included or offered as an extension to the policy.

Other additions to you may wish to consider adding to your Public and Products Liability Insurance include Goods in Care Custody and Control (usually included automatically) and Loss of Key Insurance (also usually included automatically).

Cash in Safe and Cash in Transit

When purchasing this type of insurance, there are two different types of cover and it is imperative that you understand what you are insured against.

The options for this cover are:

  • Negligence based wording – which would cover you should you be found negligent for the loss
  • Property Risk – which covers you against physical loss of or physical damage to the insured property up to the amount(s) Insured.

Generally your policy will also exclude theft of client’s money by employees. However, Fidelity Insurance is available to protect you against such claims and premiums are available for this.

Statutory Liability Insurance

Statutory Liability insurance protects you from any accidental infringements which incur fines, penalties, or court costs under any statutory authority.

Professional Indemnity Insurance

Professional Indemnity Insurance is similar to Errors And Omissions cover in that it covers you against claims brought against you due to alleged professional negligence. The main difference here is that the cover is required where you charge a fee for your professional service – e.g. Consultant, Private Investigator, Training, and so on. The coverage is also more comprehensive than Errors And Omissions cover. Insurers may offer this policy as an extension to your Liability policy or it may also be purchased separately.

Other information relating to Liability Insurance:

Sub-Contractors – Liability Insurance

It is important to ensure that your sub-contractors have their own liability insurance policy in place as the general insurance definition of a sub-contractor/employee is different from Workers Compensation Insurance. If your sub-contractor operates under an ABN (Australian Business Number), then they will require their own liability insurance policy, regardless of whether they work one hour or 40 hours a week. If your sub-contractors are deemed contractors (refer to Workers Compensation Section) then you should consider whether they should have their own Workers Compensation Insurance or Personal Accident Insurance policy to reduce the possibility of any personal injury claims brought against you.

It is also important that you check with your current Insurer to see if you are protected against sub-contractor claims for personal injury as not all Insurers include this cover automatically, so you may need to request cover. An additional premium may apply.

Some Insurers will allow you to cover your sub-contractors under your liability policy for an additional cost. However, your sub-contract should be advised that under this arrangement, they would only be insured whilst operating for you or your company. You would need to consider whether this would be in your best interest because if your sub-contractor is responsible for an incident /claim, then the entire claim would be brought against your policy which may ultimately affect your insurance history and premium costs.

Vicarious Liability (included in your Liability policy)

Even if your sub-contractor is responsible for an incident you may still be partly responsible/negligent as well. If a claim is brought against your sub-contractor, it is likely that their Insurer/solicitor would also include you in the claim as a second or third defendant. Vicarious Liability insurance can help ensure your defence costs and the final judgement are insured.

If you do not ensure your sub-contractors have their own insurance policies, then you run the risk of not having full protection should a claim be made against you by a disgruntled client who could ruin your reputation.

Workers Compensation Insurance

Workers Compensation Insurance is required by Law and each state has different conditions. It provides financial protection against workplace injuries.

Is your worker an employee or contractor in respect to Workers Compensation Insurance?

This can be difficult to ascertain. The ATO provides an online decision tool to assist you to find out whether your worker is an employee of contractor:

  • Employees work in your business and are part of your business.
  • Contractors run their own business and provide services to your business.

There are tools available on the Australian Taxation Office website (www.ato.gov.au) to help you determine the status of a worker.

Management Liability Insurance

Management Liability generally includes Directors and Officers Insurance as well as many extras, such as: Employment Practices; Tax Audit; Crime; Statutory Liability, Company/Entity Cover, Superannuation Trustee cover to name a few.

The explanations below highlight how these policies can protect you and your company (not available to sole traders or partnerships, although some sections may be able to purchased separately):

Directors Officers Insurance:
This is designed to protect the personal assets of directors and officers of a corporation by providing indemnity for loss arising from a claim as a result of a ‘wrongful act’ committed by them in the course of performing their duties. A Wrongful Act is usually defined as an error, mis-statement, misleading statement, conduct, omission, neglect or breach of duty.

Examples would be Customer disputes, competitor disputes, regulatory inquiries, possible shareholder disputes, negligence in running the company, management of employees, work health and safety issues, trade practices issues such as discrimination, and defamation.

Company Liability:
Provides coverage to the company relating to claims alleging corporate wrongful acts and further it extends cover for the company’s representation costs in connection with preparation and attendance at investigations by official bodies.

Statutory Liability:
Cover explained earlier in the article.

Crime:
Direct Financial loss to your company which includes Fraud/Theft by an employee (this is not designed to cover your client’s money in transit/safe).

Tax Audit:
Accountant’s fees as a result of an ATO or State government audits.

Cyber/Privacy:
New Privacy legislation was introduced in March 2014 which has increased awareness around cyber attacks, privacy and cyber exposures. More than 20 per cent of Australian Businesses have experienced cyber crime, and 40 per cent of all attacks were made against SMEs.

Some of the common events that can result in a cyber claim include:

  • Denial of Service
  • breach of privacy
  • lost or stolen iPad or laptop.

Protection can be provided against third party claims for breach of privacy, first party claims for costs involved to respond to a breach, and also loss of profits. Some Insurers include this cover within their Management Liability policy or you may be able to purchase this separately.

Business Pack and Motor Insurance

Generally, you can obtain the following covers within a business pack policy. This list is an example only and should not be considered exhaustive:

Fire and Perils, Business Interruption, Burglary, Money, Glass, Electronic Equipment, Machinery Breakdown and General Property (laptops, tools of trade, etc.), transit (cover your stock), and Motor Insurance.

There are other Insurances that are available that may be suitable for your business which have not been covered in this article. Before setting up any business, seek advice from a suitably qualified broker. You should also re-evaluate your cover ever twelve to eighteen months to ensure that your cover evolves to meet the growing demands of your company.

Kylie Howlett has over twenty years experience the Insurance Broking Industry, gaining valuable experience and knowledge managing various types of portfolios including Corporate style risks to your SME business. Since 2008, Kylie has specialized in insurance cover for security businesses.

 Kylie can be contacted at kylie@guardsafe.com.au

 

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