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Some business owners choose not to take out insurance because they believe they don’t need it.
This generally involves two of the most important forms of business insurance, public liability and professional indemnity.
Both of these covers basically relate to the business owner causing someone else’s loss due to negligence.
Some business owners have the attitude that since they’re so careful and never do anything wrong, they don’t need these forms of cover.
But there is something that they’re missing…
I don’t make mistakes, so I don’t need insurance
It’s easy to see how business owners could make this assumption. After all, business insurance is just another expense, and if it can be avoided then why waste money on it?
The theory is that if they never make an error which results in someone else’s loss, then they don’t need insurance to cover such losses.
We can talk about the ‘what if’ and ‘just in case’, but some business owners just refuse to listen. As insurance brokers we often here this classic line:
“I’ve been in business for twenty years and never made a claim on public liability. I don’t need that insurance”.
That’s fantastic that they’ve operated for so long without incident, but it’s a dangerous attitude to have.
It’s like saying “I’ve been alive for 32 years and haven’t died yet, so why do I need life insurance?”
It only takes one incident for everything to change. Big time.
No seriously, I NEVER make mistakes!
Okay, let’s say you are somehow immune to making mistakes. Surely in that case you wouldn’t need public liability insurance?
But just because you don’t make mistakes doesn’t mean that you can’t be accused of making a mistake.
If someone was to take legal action against you because they believe your business activities have resulted in them suffering a loss, you will have to defend yourself in court.
It’s not as easy as spending half a day in court and walking out scot free. Instead, you could find that defending yourself and your business takes months or even years, along with legal bills in the tens or even hundreds of thousands of dollars.
Thankfully public liability insurance doesn’t just cover the final payout if you are found to be liable.
Instead it also covers your defence costs, which in some cases can be the most expensive of the entire process regardless of whether you are found to be liable or not.
Still think it can’t happen to you? Have a read through this real life example of a carpenter who was very lucky to have the right insurance.
A staircase was designed with the understanding that the design was only to be used as part of a council planning application.
Down the track a carpenter was given the plans in order to build the staircase, but made some amendments to the original plans. Then as the staircase was built, further changes were made.
Sometime after the staircase was built there was a terrible incident where a family member fell down the stairs whilst holding a baby. Sadly the baby suffered life changing injuries.
The family took legal action in order to seek compensation, and despite all the changes made since the original design, the person who drew up the original plans found himself dragged into the case.
Ultimately it was found that the original person was not liable in any way, but his defence costs totalled a staggering $300,000.
So even though this person was not at fault, he still racked up $300,000 in legal bills just to prove his innocence.
Thankfully he did have the right insurance in place, and the defence costs were met by his insurer.
And if you’re thinking that the court would award the costs back to you, even if that does happen you still need to come up with the money in the first place to defend yourself.
So as you can see, even if you aren’t at fault there are still major costs to be covered when it comes to defending your business in the event of a claim against you.
Regardless of whether or not you think you’ll ever be responsible for someone else’s loss it is still important to have the right insurance in place to defend yourself and your business.