28 November 2016

There is a myth that an Insured never needs to purchase run-off cover for an occurrence-based policy. Public Liability is one such policy.

When you consider a public liability policy in detail and link the occurrence-based definition back to the Operative clause of the vast majority of Public Liability covers it is clear that this myth is far from the truth.

In brief a typical operative clause reads:

We agree to pay to You or on Your behalf all amounts which You become legally liable to pay as Compensation in respect of:

  • personal injury; and/or
  • property damage; and/or
  • Advertising injury;
  • happening during the period of insurance within the geographic limits in connection with your business and caused by or arising out of an occurrence.

    As a result it is imperative that the Client/Insured be advised they do need Run-Off cover where there is any chance of an injury or damage occurring to a third party after a policy is cancelled or lapsed.

    This is particularly important for a tradesperson, where a third party is injured and it is alleged that the tradesperson’s work was the cause. If the injury occurs AFTER the policy has been cancelled or not renewed (due to retirement or change to employment status) then they are NOT covered.

    There was a tragic event in Brisbane in November 2008 where a party for parents of graduating year 12 students was being held at the residence of one of the parents. During this event the deck on the home collapsed, killing one parent and injuring three others.

    In 2012, as a result of this, the family of the deceased woman sued the builder who completed the work. They were seeking more than $1million in damages. The other three injured women also lodged claims.

    You can read full newspaper article detailing this at: http://www.couriermail.com.au/news/queensland/balcony-death-family-to-sue/story-e6freoof-1226360649808

    The important fact that comes out of an event such as this is that the policy that was in force at the time of the deck’s collapse is the only policy that would respond. There is NO cover offered by the policy that was in force when the deck was built. The logic behind this is that the event or occurrence that caused the injury is the collapse NOT the construction of the deck.

    This example highlights the need for run off for Public Liability, however the same reasoning applies to Product Liability. If a Client manufactures, directly imports or is deemed to be the manufacturer of goods then they also have a need for Liability cover after they have ceased trading.

    Tom Wilkie

    Account Manager (Qld)