Broad form liability provides protection for a business for legal liability to pay damages arising out of injury or damage caused to third parties or their property during the performance of the business.

The vast majority of commercial policies have only ever been exposed to the General/Tennant type of wording where cover is limited.

An important question then stands; “why change to broad-form liability?”.

The increased liability risks companies face coupled with a requirement to increase limits and the rise of legal costs provides enough motivation to consider the Broad Form Liability product. It is of great value to a prudent broker to build relationships with international markets to manage capacity and exposure issues.

“Of course, this is not without challengers – one being that the onus of proof lies with clients to establish that the third-party loss occurred as a result of an accident”, writes Nhlokomo Ngwenya; Head of Corporate & Global Markets.

While the broad form policy responds to actions where the insured is legally liable for damages or injuries, this cover may be referred to as “non-accidental”. If the insurers wish to repudiate based on the fact that an intentional act caused the loss, the onus of proof rests with them, rather than the insured.

Broad form provides a wider trigger that is less likely to lead to a claims dispute. This can be of great benefit to the insured when submitting a claim.

Definition of Terms

In a Multimark wording, damage is defined only as “loss of or damage to tangible property”.

In the broad-form policy the definition is wider and includes:

• Actual damage to property
• Loss of possession or control of property (as may be the case if the property is not damaged; but is simply inaccessible)
• Loss of use (as in ii above) iv. Prevention of access

Broad-form provides an extended definition of damage meaning the property need not be physically damaged, but merely unable to be used. This could be a consequential loss where no actual damage has occurred.

On the one hand; Multimark provides for death, injury or illness to a person, broad-form defines injury as: bodily injury, death, illness, disease and mental anguish

Mental anguish is the differentiator here.

“Many insurers do not view pain and suffering; and loss of amenities as “bodily injury”. Yet, each year around 60% of the total benefits paid out by the Road Accident Fund are related to non-pecuniary injuries such as pain and suffering; and loss of amenities, comments Nhlokomo.

Territorial Coverage

A multimark wording restricts coverage to South Africa, Namibia, Botswana, Lesotho, Swaziland, Zimbabwe and Malawi while broad form provides world-wide, or global cover.

Many companies trade and undertake contracts beyond the Southern African borders. Broad-form moves through all territories with the insured’s business.

Pollution and Contamination

A Multimark policy covers sudden and accidental seepage, pollution or contamination. Broad-form covers sudden and unforeseen pollution. Pollution is defined as:

• Release of liquids, gases, contaminants or pollutants
• Smells iii. Noise, light, vibrations, electricity
• Temperature changes

Multimark cover may have been adequate in the past but disputes over what is accidental often negate the cover. Many insureds are also faced with nuisance-type lawsuits, especially in respect of noise and light pollution, as is the case with restaurants and nightclubs in residential areas. Broad-form provides more comprehensive pollution cover.

Product Design and Manufacturing

A Multimark wording excludes losses caused by defective design. Broad-form covers losses caused by products designed, manufactured, constructed, installed, repaired and altered by the insured.

Broad-form displaces the argument over whether a claim is covered due to design versus manufacturing faults.

Some Multimark wordings provide limited Gratuitous Advice cover as part of the product liability section. Broad form provides specific negligent advice cover supplied with products and work performed. The cover can also be extended to cover full errors and omissions.

With the advent of Consumer Protection Legislation governing advice rendered, wider E&O type covers and advice protection are becoming critical.

“Even in the absence of legislative changes and increased litigation, it would be remiss not to consider the broadest possible insurance solution for clients”; concludes Nhlokomo. Innumerable extensions are available to the standard broad-form policy: from custody and control to medical malpractice and inefficacy. The net on broad-form is wide enough to cover just about any scenario.

Nhlokomo Ngwenya is the Head of Corporate & Global Markets at Maksure Risk Solutions.

Contact our teams on Tel +27 11 805 0086 or Email: info@maksure.co.za.

About Maksure Risk Solutions

Maksure Risk Solutions is an Afro-Global independent specialist insurance and reinsurance broker with business footprint in Africa, Asia, East & Western Europe, South America and the Caribbean. We provide innovative and tailor-made risk solutions in Insurance and Reinsurance as well as Risk Financing and Actuarial Consulting geared towards capital management and strengthening our client’s balance sheet. Maksure is also one of the major players in Captive Management (Establishment & Management) in South Africa, Mauritius, Bermuda and various other jurisdictions. We have access into the Lloyds of London with a deep understanding of African markets. Our global nature ensures that our clients access quality capacity as well as some of the world’s latest thinking and solutions.