There are a few key triggers that must be met before your liability insurance claim can even be considered. One of them is that a third party (eg. your client) must have suffered a loss. For public liability this is typically due to physical damage you’ve done, that they are holding you responsible for. This loss could be the cost to replace or repair the damaged items.

This can be the source of misunderstanding because in some situations the insured (eg. you, the builder) has caused damage but has then fixed it up and so their client, or whoever the third party is, has not actually suffered any loss. The builder then tries to claim on their liability policy for their own costs to fix the damage. Technically, there is no liability claim if the person insured by the policy is not liable to anyone.

Prevention & Repair

Once something has happened insurers require you to minimise the cost of the claim by taking action to prevent continued damage. However, any cost you incur doing this is typically not part of the claim. They also expect that as far as is reasonably possible you won’t do any repairs until they’ve done their own inspection and authorised the repair work.

An Example

A plumber installed a new ceramic basin into an upstairs bathroom during a renovation.  While carrying it up the stairs he dropped it, cracking the basin.

Policy Response Scenario 1 – The homeowner had purchased the basin two weeks earlier and supplied it to the plumber to install.  Because it was his client’s property the plumber was covered for the cost of the replacement basin.

Policy Response Scenario 2 – The homeowner had told the plumber just to get a standard basin using his trade discount, so he went to a trade-only plumbing warehouse and purchased one, intending to add it to the invoice. He wasn’t covered in this scenario because he still owned the basin at the time the damage occurred, so there was no loss to a third party.

You Must Be Held Liable

To trigger a liability claim, you must be held liable by the third party that has suffered the loss. You need to include this correspondence with your claim form. It could be an email or a letter outlining what they are holding you responsible for, ideally including a description of the loss and a cost.

In a Nutshell

One of the key triggers for a liability claim is that a third party (not you) must have suffered a loss and be holding you liable for it. A letter or email outlining this is an essential part of any claim under public liability insurance. If the only cost is yours and there’s no liability or third party loss, then there’s no claim.

Liability Insurance