Introduction to third party liability UK construction insurance
Introducing our new construction series
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To this end, we produce regular technical information about topics and industry development which we feel will be of interest to our audience.
Welcome to our new series of construction third party liability insurance article
This article will take a closer look at a key class of insurance for the construction industry, third party liability (TPL).
These TPL policies, sometimes referred to as public liability (PL) policies, protect contractors against liabilities arising from damage to property owned by, or injuries to, third parties arising throughout the course of their activities.
Firstly, to clarify the terminology; should we use TPL or PL as the correct term? Some clarity on this point was provided in the infamous case of Tesco -v- Constable, relating to the tunnel collapse on the Chiltern Line at Gerrard’s Cross in 20051. The court, in delivering its decision, commented that TPL was a more appropriate name for the product given that the contractor’s liability is not limited to members of the public, as would be inferred by the term PL insurance.
So, TPL protects the insured for legal liabilities to third parties. In this context, those third parties can be members of the general public, adjoining landowners, principals or other companies in the supply chain as well as their employees. However, TPL policies exclude the insured’s liability of injury disease or death to their own employees, as this is insured by a separate, mandatory class of insurance known as employers’ liability (EL).
The liabilities insured by TPL policies are restricted to those arising from three key liability perils, detailed below:
- Injury or death to third parties
- Damage to third party property
- Nuisance, trespass, obstruction and other similar causes
Liability in law is not strictly limited to the immediate loss, so the TPL policy will respond the additional liability arising. For example, damaging third party commercial property may also result in a loss of profit for the business concerned. Generally speaking, TPL policies will indemnify for these liabilities that attach in common law to the liability perils listed above.
Liability disputes between parties make fertile ground for legal proceedings, with protagonists regularly turning to the courts to resolve disagreements and seek formal redress. As a result, TPL policies will include the cost of legal representation in defending claims made against the insured. Similarly, for criminal prosecutions under health and safety at work legislation or corporate manslaughter prosecutions, the cost of legal representation is also covered. Please note that these policies will not indemnify the insured in respect of fines or penalties levied by the courts in these cases.
In addition to cover for the legal entity, it is common for a TPL policy to include additional insureds including directors, employees, consultants, work experience students or interns for any liabilities they may incur through the course of the company’s activities.
We will shortly be releasing the first article in this series which will cover the following TPL related subject matters in the context of the construction industry:
- Products liability/completed contract works
- Contractual liability
- Financial loss
- Pollution liability
- Professional indemnity
References
The information contained herein is based on sources we believe reliable and should be understood to be general risk management and insurance information only. The information is not intended to be taken as advice with respect to any individual situation and cannot be relied upon as such.
