Liability Insurance: A Guide for Alarm Installers

Running a business, whether it’s well-established or a brand-new venture, comes with a number of responsibilities and considerations. One crucial aspect that often deserves attention is liability insurance. While you may be familiar with the need for such protection, the specifics and reasoning behind it might not be entirely clear.

Here is a quick summary of the different types of liability insurance and why you might need them.

What is Public Liability Insurance?

This insurance provides protection against any third party, individual or business, being awarded damages because you or your company have caused injury or damage to them or their property or premises. This will also cover any related legal fees, costs and expenses. This is normally available in conjunction with Products Liability and sometimes jointly referred to as Third Party Liability.

It is usually a requirement if you are working in someone’s home or premises or if you are attending exhibitions or trade shows. A claim could occur if you are onsite and someone trips over a cable and sprains their wrist, unable to work they make a claim against you.

There are extensions of cover available under Public and Products Liability that may not usually be included under a standard Public and Products Liability insurance policy; these could include Professional Advice, Failure to Perform or Efficacy cover, Fidelity or Dishonesty of Employees cover, Defective Workmanship or Guarantee, Financial Loss and the Loss of Customer Keys.

Do I need Public Liability Insurance?

Whilst this cover is not compulsory, some clients may require evidence of cover from you before allowing you to carry out any work as this insurance demonstrates your means to address any damage or injury caused to them or their property in the course of your work. Most security industry inspectorate bodies will require evidence of this cover to satisfy their own membership criteria.

What is Products Liability Insurance?

This cover is normally only provided in conjunction with Public Liability insurance and provides protection against any damages awarded against you as a result of damage or injury caused by a product you have manufactured, sold, or supplied. Your business may be held legally responsible for any injuries to people or damage to property caused by a faulty product.

It is often combined with the public liability insurance, but it is always worth checking. Most businesses take out policies that cover them for compensation claims of between £1 million and £5 million.

Do I need Products Liability Insurance?

You have a legal responsibility for any damage or injury caused by any products you sell or supply even if you are not the manufacturer. This can be where; a) your company name is on the product, b) your company repairs, refurbishes, alters or is installing the product, c) it was imported from outside the EEC, or d) the manufacturer cannot clearly be identified or has gone out of business.

This cover is not compulsory but again, some clients may require evidence of cover from you before allowing you to carry out any work. Most inspectorate bodies will require evidence of this cover to satisfy their own membership criteria.

What is Employers Liability Insurance?

This cover protects your employees if they are injured because of an accident while working for you or if they contract an illness through your fault or negligence. A minimum limit £5 million is a legal requirement for most businesses, although there are certain exemptions – if you are self-employed or if you only employ close family (and are not incorporated as a limited company).

Do I need Employers Liability Insurance?

You are legally required to hold Employers Liability insurance if you employ people under a contract of service or apprenticeship. The Health & Safety Executive (HSE) can impose fines of up to £2,500 per day for each day you do not hold cover where required. A definition of an employee could be, a) they are under a contract of service, b) you deduct National Insurance and Income Tax from their salary, c) you control when, where and how they work, and d) they cannot employ a substitute when they are unable to work.

When you take out this insurance, a Certificate of Employers Liability Insurance will be issued which must be clearly displayed where it can be easily read by employees. You are also obliged to produce this certificate to any HSE inspector on request. Failure to correctly display or produce this certificate can result in fines of up to £1,000.

It is a legal requirement that a complete and continuous record of your Employers Liability insurances are maintained, and copies of your Employers Liability Certificate are kept for a minimum of 40 years as some illnesses or incidents may take years or even decades to materialise.

When Is Employers Liability Insurance Not Compulsory?

If your business is not a limited company, you are the only employee (sole trader) or you only employ close family members, then you do not need compulsory Employers Liability cover.

Limited companies with only one employee owning a minimum of 50% of the issued share capital of the company (partnership) also do not require compulsory Employers Liability insurance.

Many businesses do however arrange Employers Liability insurance even where it is not compulsory because of the financial security it provides.

What is Professional Indemnity Insurance?

Professional indemnity (or PI Insurance) provides cover for your business legal liabilities including costs and expenses in the event of a third party, individual or business, taking legal action against you for a financial loss they have suffered as a result of the advice you gave them in a professional capacity, not forming part of an overall contract to install, maintain, repair, etc. A proposal form is generally required prior to obtaining a quotation for this insurance.

Do I need Professional Indemnity Insurance?

This type of insurance is compulsory for certain professions such as Doctors, Solicitors, Financial Advisors, Architects, etc. If you give professional advice by way of carrying out risk assessments, surveys, system designing, consultancy or training that is not included in, or part of an overall contract to install, maintain, etc and incurs a separate fee or charge, then you have an exposure for Professional Indemnity.

Alarminsure provides a standard free limit of £250,000. Higher limits of indemnity are available under a separate policy. Any advice, design or specification given in conjunction with an installation, will be included as Professional Advice (See below).

What is Professional Advice?

This is automatically provided under the Public Liability section of the Alarminsure policy and defined as ‘advice given as part of an overall contract to install, maintain, service and/or repair that does not incur a separate fee’. This provides protection against any third party, individual or business, being awarded damages because the advice given to them by you or your company resulted in injury, loss or damage to them or their property as long as the advice given was part of a contract to install, maintain, service and/or repair.

If you do give advice for a separate fee or carry out risk assessments, system design, surveys or provide training you will need to consider arranging Professional Indemnity Insurance.

What is efficacy insurance cover (Failure to Perform)?

Efficacy Cover protects the policyholder against legal liability for injury or damage to third parties caused by a product or service failing to perform as intended. You might also see it described as inefficacy cover or failure to perform. It is an important cover for contractors involved in performance-critical activities like installing alarm and security systems or fire suppression systems.

To find out more read our blog – Alarm Installation: Protecting Myself with Efficacy (Insurance) Cover

Do I need efficacy insurance cover (Failure to Perform)?

Evidence of Efficacy Insurance is required by the leading inspectorate bodies within the Fire & Security industry to meet their membership criteria. It is therefore important to check that, if you are currently a member, or considering inspectorate membership, this cover is specifically mentioned as being included under your insurance policy. Efficacy insurance is not compulsory for non-members but is strongly recommended to ensure the correct level of protection. The Alarminsure policy provides this cover as standard.

What are the common causes of efficacy claims?

A 2018 report by the Local Government Association highlighted just how important efficacy cover is. They identified that in 20% of residential fires, the mains-powered smoke alarm failed to perform.

It’s important to remember that several factors could contribute to this including product faults, incorrect installation, or poor maintenance. However, without efficacy cover, the installer or supplier is at risk from claims relating to any loss of property or life arising from the incident.

What Next?

Depending on your risk profile you might need some or all of the covers outlined above, it is often useful to think about the jobs you carry out and the risks you face carrying out those activities, but we know that is not always easy which is where we can help you.

If you need additional information or want to talk to one of the team, please get in touch with us at 08000 710 999.