If you’re a fire protection practitioner, you definitely need Public and Products Liability (PL) insurance and you probably need Professional Indemnity (PI) as well. But just how much is enough?
Just ten years ago, it wasn’t uncommon to find fire protection companies in Australia that didn’t hold any PL or PI insurance at all.
The understanding of the risks they faced was low in the industry, and their clients knew even less and therefore had low requirements, if any. For most roles in the industry, there were no accreditation or licensing schemes that required insurance.
But in only a decade that has changed significantly, as several high-profile incidents have demonstrated the risk exposure fire protection businesses have, and clients and governments have pushed for higher insurance requirements.
But just what that risk exposure is and what requirements fire protection businesses need to meet has been hard to keep track of. So if you’re working in the industry, what insurance should you actually have, and how much of it do you need?
What does it cover, and who needs it?
Public and Products Liability (PL) is, basically, necessary for every fire protection business. Public Liability insurance covers property damage and/or personal injury that your business activities might cause, while Products Liability covers damage caused by your products.
The legal definition of ‘products’ is broad enough that even if you don’t sell products, there are still numerous situations where you need Products Liability insurance. The classic example is your company barbeque – you’re cooking sausages for your staff, but they’ve been left in the sun a little too long and someone gets sick. That’s covered by Products Liability insurance.
Because of the amount of overlap between these two types of coverage, Public and Products Liability are typically bundled together in one policy.
There are two triggers in a PL policy; property damage and personal injury. For fire protection, property damage might be a someone charging a fire sprinkler system before an end plug has been installed, causing water damage to the site. Personal injury might be someone tripping over equipment you’ve set out on the floor ready to be installed and breaking their ankle.
Professional Indemnity insurance (PI), meanwhile, covers you against losses someone has as a result of advice they’ve paid you for. For example, if you sign off on the design of a fire protection system and it’s later determined not to meet the required standards, the cost to rectify the system would be covered by your PI insurance. Traditionally this has only been required by white collar workers such a certifiers, engineers or designers.
Increasingly, though, PI is becoming a requirement even for technicians doing installation and maintenance. Legislation in some jurisdictions, such as Queensland, require you to hold PI insurance even for activities like testing fire extinguishers, which isn’t considered a PI risk.
But what if you occasionally give incidental advice to clients for free while you’re out on a job, but you don’t have PI insurance? AWIB recognises that’s an common part of client relations for a lot of fire protection practitioners, so we’ve written ‘errors and omissions’ cover into our PL policies. That covers you for incidental advice where no fee is charged, up to the sum of your Public Liability cover. Not all insurers provide this, though, so if you’re not with AWIB check the fine print of your policy.
How much do you need?
Most people look at the minimum requirements in legislation or accreditation and licensing schemes to determine how much PI and PL insurance they need. That’s definitely a good starting point, but the ultimate goal of insurance isn’t to meet some regulatory requirement – it’s to cover you when something goes wrong.
It’s important to look at the worst case scenario that might happen in your line of work. Could you be caught up in multi-million dollar insurance claims like the Lacrosse building fire or Opal Tower?
A decade ago the level of PI and PL insurance fire protection companies were expected to hold was lower, and the industry was, arguably, widely underinsured. High profile cases like Lacrosse, Grenfell and Opal Tower have reset industry and government’s understanding of the risks in recent years, however.
For PL insurance, $10 million in coverage is definitely the minimum you should consider for a fire protection business in this day and age, and you should probably have $20 million in coverage. Depending on what part of the industry you’re working in, larger contracts will often require you to hold as much as $30 million or $50 million in PL coverage.
For PI insurance, $1 million is the minimum. If you’re one of those routine service techs in Queensland who only needs PI insurance because of that state’s legislation, then you should be fine with $1 million. If you want to gain FPAS Fire Systems Design or Fire Safety Assessment accreditation in NSW, you will need $2 million in coverage.
But if you’re being paid to give advice to clients, you should consider $5 million the minimum, with $10 million the recommended level of coverage.
Keep in mind that while AWIB doesn’t, many insurers include defence costs in your PI coverage amount. In that case, your coverage needs to be enough to cover not just the cost of whatever went wrong, but also all the legal fees that went into determining your liability. AWIB recognises that makes it very difficult to understand how much you’re actually covered for, so we pay your defence costs in addition to the sum insured.
What happens if you don’t have enough?
If you don’t have enough insurance and something expensive goes wrong, you’ll be out of pocket for whatever the difference is. You’ve probably heard of companies going bankrupt after they get hit with a large insurance claim; being underinsured is usually the reason why.
To avoid being one of those companies, find an insurance broker and underwriter that understands the detail of your industry and the specific role your company plays within it. If your insurer doesn’t understand the risks you face, you’ll probably end up paying extra for risks that don’t apply to you, while also being underinsured for the unique risks you do face.
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Not sure how much PI or PL insurance you need? AWIB are the specialists in insurance for fire protection businesses. Whatever sector of the industry you’re in, we understand what you do and the risks you face and can offer insurance coverage tailored to your needs.