Communique from SATIB Atta’s insurance advisor and facilitator for Atta 24 Emergency Response
Liability Cover – How much is enough?
With the recently released Tourism Performance Figures for 2016 showing healthy increases through Africa’s airports it may be time to check your insurance limits again.
Liability policies are those that will indemnify the insured should they be found legally liable/ negligent for damage or injury to third party property or person.
Like it or not incidents do occur – the SATIB24 Crisis Call unit alone receives close to 100 calls a week from around Africa, two of which pose a severe threat of capable of crippling the average business without specialist intervention or appropriate risk transfer.
Unlike a vehicle or a building that you can attach a value to, it is very difficult to quantify a potential liability exposure i.e. how much it will cost in the event of a claim. A few things are worth considering.
1. Net worth- Within the tourism and hospitality sector, you are often dealing with high net worth individuals. The loss of earnings they suffer will be a part of your claim and this could translate into years of executive level salaries. Future loss of earnings (factoring in annual inflationary increases and potential promotions) – for the rest of that individuals anticipated working career can amount to astronomical figures.
2. Currency– add to the above a Dollar or Euro exchange factor (not applicable in South Africa) and you are rapidly approaching catastrophic numbers that are likely to cripple any well-structured business.
3. Legal costs– right or wrong just the defense costs can be exorbitant. Some cases drag on for a number of years; in fact few are settled in a matter of months.
4. Medical / Pain and suffering– no need to detail the impact of hospital bills on determining a quantum. In addition pain and suffering for the rest of the injured parties life! Someone needing nursing care would need two or three professionals to ensure 24hr attention, 365 days a year.
Taking the above into consideration quantum’s can quickly stretch over US10M. Liabilities are therefore arguably the single biggest exposure that any company faces, particularly within our very specialized industry, which it becoming more and more litigious.
With Africa’s source markets being dominated by USA and UK respectively (and indeed most other territories) it is crucial that Companies carry sufficient liability cover and that the sum insured is sufficient to indemnify the Insured for potential International award in USD, British Pounds or indeed Euro’s as an example. Each client, therefore, needs to factor in who their target market is in terms of age, net worth and nationality when determining their indemnity limit (sum insured). In addition, the liability exposure to the tourism and hospitality sector is unique and therefore requires a specialized product. A few covers that should be considered:-
· Legal Defense Costs– Is this cover included/ has the limit been capped?
· European Community (EC) Directive– critical should you do a lot of business with international booking agents.
· Jurisdiction– In which courts in the world will your policy respond
· Territorial Limits– In which Countries are you/ your subcontractors permitted to operate in
· Sub-contractors- Are you covered for the actions of your subcontractors? Most operators make use of sub-contractors for certain services e.g. transfers, day trips, activities, specialist skills etc. If you receive monies and bookings on behalf of these entities then you are potentially liable. It is vital that these individuals or companies have their own covers in place and that you check this up front.
· Extensions - Depending on the nature of the business there is a multitude of extensions that should be considered.
For more information, please contact:
Andre du Toit
+27 82 446 1697