The life of a business owner is full of responsibilities and obligations and sometimes it is difficult to be sure every aspect of our business is accounted for or under control. One of the queries I hear a lot has to do with third-party liability insurance. The saying goes, nothing in life is certain besides taxes and death but I think we can also include insurance here; whether it is for our cars, houses, health, life and a wide variety of other possibilities, we can say for sure that insurance policies are an integral part of our existence whether we want them or not and the same should go for our businesses.
As business owners, our livelihood is an absolute priority so it is only natural we should strive to safeguard it as much as possible and this must include potential law suits, fines, accidents etc. Third-Party Liability Insurance covers risks that may come about from, “…actions or omissions that causes harm or damage to another, where there is fault or negligence in which the obligation arises to repair any harm caused…” according to Article 1902 of the Spanish Civil Code.
Imagine for one moment the following scenarios:
Scenario One: You serve food products past the sell-by date or that has been poorly prepared and one of your patrons suffers some type of adverse reaction or intoxication and end up hospitalized or with
Scenario Two: As a professional (accountant, lawyer, doctor, engineer…), you make a mistake on your client’s paperwork that results in a big fine from the Tax Office, loss of a law suit, disability or death from prescribing incorrect medication or a slip of the scalpel in the Operating Room, or the collapse of a building.
Scenario Three: The floor in your shop is uneven of there is a broken tile and one of your customers takes a tumble.
In each one of these scenarios, the business owner is responsible for damages caused so, if you do not have third-party liability insurance, you would be held personally responsible for the payment of any damages (material or personal) awarded your customer. Accidents and mistakes are sometimes unavoidable, so it is only good sense to ensure you are covered against these eventualities to prevent the loss of your business.
Whilst the most logical course of action is to contract this type of insurance, there are certain professions that are obligated to take out third-party liability:
- Private Medical Professionals
- Insurance Brokers
- Technicians and companies that maintain lifts
- Entertainment or Leisure Activities
- Sport Complexes
- Restaurateurs and the Hospitality Sector
- Public Transport and Transport for Schools
- Travel Agents
- Bullfighting and Pyrotechnic (Firework) Shows
- Gas and Electricity Installation Technicians
- Lawyers, Economists, Consultants…
- Businesses in general that are open to the public
Even though your particular profession may not be listed as one of those obliged by law to obtain insurance, just stop for a moment and think back to the three examples detailed before and imagine, heaven forbid, this ever happens to you before you decide against paying out for a policy. Whatever you pay annually is nothing in comparison to what you may be forced to pay in the event of an incident. In any case, all my clients know I always recommend they take out third-party liability insurance regardless of their business type, it is only good business sense especially in a world where people can be so litigious!
Third-party liability must not be confused with the insurance automatically included within your social security contributions and discussed in previous articles, as this does not cover accidents, mistakes, omissions, malpractice etc pertaining to your business.
Shop around to see which insurance company can provide the best cover for your business (don’t forget to consult with your bank as they also provide insurance) and make sure your business and your clients are safe.