There are four main types of liability insurance that Credit Unions typically should consider. Each deals with different perils and will protect your business from different, potentially costly, scenarios. If you’ve ever asked yourself “What is liability insurance?” Then read on…..
What’s in this guide?
- What is Employers’ Liability Insurance?
- What is the definition of an employee?
- Why have Employers’ Liability Insurance?
- What is Public Liability Insurance?
- Do I need Public Liability Insurance?
- What is Directors and Officers Insurance?
- Do I need Directors and Officers Insurance?
- What is Professional Indemnity Insurance?
- Do I need Professional Indemnity Insurance?
What is Employers’ Liability Insurance?
Employers’ Liability Insurance is one of the main types of business insurance. It can cover compensation costs and legal fees if an employee or ex-employee sues for illness or injury caused by their work, on or off site. Even former employees can make a claim against you, if it’s found that their injury or disease/illness resulted from their work whilst working for the Credit Union.
As a small business, you will need Employers’ Liability Insurance if you have one or more employees. You should be insured for at least £5 million – an indication of how financially damaging a claim by an employee has the potential to be to your business, if you don’t have cover in place. CUNA Mutual provides £13 million as standard under its commercial combined policy for Employers’ Liability Insurance.
As a business, you do your best to limit the possibility of injury or illness to your employees resulting from their work. But if they do have an accident or become ill, your business could be sued for compensation under your employers’ liability insurance. As a result, businesses in Ireland that employ staff are advised to have employers’ liability insurance to provide cover them against a claim from an employee.
What is the definition of an employee?
An employee is defined as someone who:
- Is under a contract of service or apprenticeship with you
Why Have Employers’ Liability Insurance?
In most cases if you have employees, employers’ liability insurance with cover of at least €13 million, is recommended in order to protect your employees and your business alike
Easy access to ‘no win no fee’ legal services which help employees claim compensation may increase the likelihood of a business experiencing an employers’ liability claim, if they suffer an accident or illness which they think has been caused as a direct result of their work
Your employers’ liability could be triggered even if the employee is a voluntary helper, casual worker or is self-employed, but working under your supervision
The legal and compensation costs of defending your business against an employers’ liability claim could significantly damage your business if un-insured
Many companies, local authorities, main contractors or organisations will also insist on their suppliers having employers’ liability insurance cover in place
What is Public Liability Insurance?
Credit Unions interact with members of the public therefore you’ll want to consider taking out Public Liability Insurance. This type of liability cover is not a legal requirement. However, it is highly advised in order to avoid potentially costly legal action should your Credit Union’s actions have a negative impact on a member of the public.
Do I need Public Liability Insurance?
While not a legal requirement, having public liability (P.L.) insurance is an important consideration for any business that interacts with members of the public or other businesses. Without it, your business may find itself at serious risk of being sued for large amounts of money.
CUNA Mutual’s commercial combined policy (which can include your Contents, Buildings, Employers and Public Liabilities) includes £6.5m P.L. cover as standard.
What is Directors & Officers Insurance?
D&O liability insurance indemnifies directors and officers of Credit Unions for damages and defence costs arising from lawsuits alleging various “wrongful acts.” Many people are reluctant to serve as directors or officers of Credit Unions if the organisation does not provide this much-needed insurance, since they otherwise could be forced to pay damages out of their personal assets.
The primary role of Credit Union directors and officers is to maintain financial stability and provide the necessary resources and environment to accomplish the goals and purposes of the organisation. The unique nature of not-for-profit organisations presents directors and officers with difficult challenges in performing this role.
Regardless of organizational structure, directors and officers of all Credit unions share certain common responsibilities which, if not properly discharged, may give rise to personal liability.
Further examples where Directors and Officers of the Credit Union can become defendants against an alleged wrongful act include:
• Employment practices & HR issues
– Eg. Discrimination, Sexual Harassment, Wrongful Termination.
• Regulatory / governance breaches
– Eg. Failing to comply with regulations or laws.
• Data Security
– Eg. Customer information is hacked and posted on a public website. You are sued as a board member for not providing adequate safeguards.
• Reporting errors
• Health & safety investigations / Trading Standards / Advertising Standards
• Decisions exceeding the authority granted to a company officer
Lawsuits are brought in response to actions and decisions made by Credit Union management, including but not exclusively the Board of Directors. In short, almost any day-to-day decision or action by anyone in a Credit Union can trigger a lawsuit that could not only hurt the organisation financially, but also threaten the personal assets of those Directors and Officers.
Do I need Directors’ & Officers’ insurance?
The potential for inadvertent misconduct can be heightened by the director’s and officer’s level of involvement in the Credit Union. For many, service as a Credit Union director or officer is a part time activity with little or no compensation.
In addition, the resources of Credit Unions can be insufficient to provide directors and officers with the most desirable support. As a result, decision-making may be hindered by incomplete information, insufficient time and inability to carefully investigate and document relevant factors.
Directors and Officers insurance can provide your decision-makers with the confidence to make decisions and it supports good corporate governance by making the risks of these decisions manageable and transparent.
What is Professional Indemnity Insurance?
Professional indemnity insurance, also sometimes called professional liability insurance, covers any advice you give to a client in your professional capacity and protects you should a client believe you have failed to produce work to a professional standard. For example, if you are an accountant, who gives your client financial advice which leads to them making a loss, then professional indemnity will protect you against professional negligence claims.
If your Credit Union is involved with giving clients advice or knowledge, you’ll want to consider Professional Indemnity Insurance. For Credit Unions providing mortgages or money advice, Professional Indemnity Insurance is a requirement.
Do I need Professional Indemnity insurance?
Professional indemnity insurance is not relevant to all businesses. However, if you are in the business of selling your skills or knowledge then it may be prudent to take out professional indemnity cover. Many professions are required to have professional indemnity as part of their professional authorisation, including solicitors, accountants, architects, mortgage intermediaries, insurance brokers and financial advisers. In addition, if you write articles for trade journals or magazines, then you may want to consider taking out Professional indemnity Insurance to protect you should anyone want to sue you for libel or slander.