For whom is business liability insurance mandatory?
Since insurance is supposed to protect the entrepreneur from incurring the costs of damage caused to third parties, it seems obvious that it is worth taking care of such a policy. However, the degree of risk faced by companies is not equal. A one-person copywriter business where an entrepreneur prepares texts for marketing agencies is an example of a business where the risk of harming someone is low (though not zero). It is completely different if the entrepreneur provides training in mountaineering or deals with the management of clients’ assets.
The legislator took into account various circumstances and drew up a list of professions in which the purchase of a business insurance policy is mandatory. The collection includes:
- doctors and dentists,
- tax advisors,
- notaries,
- attorneys and legal advisors,
- insurance agents,
- property managers,
- Companies that provide security services for people and property,
- mass event organizers,
- real estate brokers,
- architects,
- accountants.
All of the listed professions and areas involve an increased risk of third-party claims. It is not the case, however, that simply operating in one of the designated professions obliges you to take out business liability. Often nuances are the deciding factor. For example, a doctor does not need an OC if he works in a clinic or hospital. However, when he runs an individual practice, OC is mandatory for him.
Business liability coverage
There is no universal coverage that applies to all professions covered by mandatory third-party liability. What kind of policy you need to take out depends on your profession or the business your company conducts.
Example:
Mr. Yaroslavl is an insurance agent. He works with four insurance companies on a daily basis, making liability insurance a must for him. This is important because it applies to agents who work with more than one company at the same time.
The obligation to take out a policy also concerns Mr. Yaroslav because, acting in concert with various insurers, he assumes part of the risk by acting as an intermediary between customers and the companies offering the policies.
And how is Mr. Yaroslavl supposed to know what insurance he should take out? He will find all the information he needs in the Decree of the Minister of Finance dated May 18, 2018 on compulsory agency liability insurance.
The last point is particularly important – before you start a business or expand an existing one with a new type of service, be sure to check whether you are required to take out a business liability insurance policy and what its scope is. Unfortunately, we will not find information on this subject in the Law on Compulsory Insurance, the Insurance Guarantee Fund and the Polish Motor Insurers’ Bureau. The answer should be sought in industry regulations, for example:
- In the Act of. April 15, 2011. On therapeutic activity – in the case of medical entities,
- In the Ordinance of the Minister of Finance dated November 6, 2014. On mandatory third-party liability insurance for entrepreneurs performing bookkeeping services – in the case of accountants performing bookkeeping as part of their business activities,
- In the Law of February 14, 1991. – Notary Law – in the case of notaries.
Each of these documents specifies in which situations OC becomes mandatory and details the scope of mandatory insurance for a particular professional group. Of course, the leading insurance companies where you can buy mandatory policies for companies also have the relevant knowledge, which they are willing to share with customers. However, if you are unsure, consider using an insurance advisor.
What are the benefits of business liability insurance?
Even if the business you’re running doesn’t make it onto the list of those required to take out liability insurance, it’s worth considering buying a policy. If only to safeguard against claims from third parties – contractors, business partners, customer subcontractors or even outsiders. Insurance will protect your company from additional compensation costs in case you cause damage to someone in the course of your business.
A great example of this is the Road Carrier’s Liability. There are no regulations in Polish law that oblige entrepreneurs engaged in the transportation of goods and passengers to purchase a company’s third-party liability insurance. Of course, still every vehicle must be insured and cars used in companies are insured under different rules than vehicles for private use, but – despite the increased risk of damage – the carrier does not need to have separate insurance. In reality, however, it is difficult to imagine a situation in which a transport company forgoes the purchase of OCPD insurance and risks huge losses.
Example:
Ms. Anita runs a business in which she transports goods in Poland and abroad. Although he is not required to take out an OCPD (road carrier liability) policy, he is responsible for the safety of the goods being transported and for delivering them at the time agreed upon with the customer. Insurance will allow Ms. Anita to protect herself in case the goods are damaged, destroyed or even stolen. This is extremely important – especially if the goods being transported are of high value.
So while carriers do not – by law – have to take out additional insurance, practice shows otherwise. The reason is simple: principals always make sure that the company they entrust their goods to is properly secured. Customers of carriers realize that in the event of any of these situations (damage, destruction or theft of goods), the process of obtaining compensation without the involvement of an insurer can drag on for years with no guarantee of success.
Important!
Carriers who provide services outside of Poland can also purchase separate international liability insurance. It is independent of domestic liability – that is, if a carrier operates both, in and out of the country, it should consider purchasing two policies.
What is the entrepreneur responsible for?
If you’re still unsure whether taking out a business liability policy is the right move, check out what you can actually be liable for as a business person. The list is long – it included, among others:
- gross negligence of the entrepreneur, as a result of which the customer suffered a loss,
- Actions that exposed customers to losses or loss of benefits,
- damage caused to customers-users of products produced by the entrepreneur,
- damage caused by employees and subcontractors,
- damage caused by vehicles belonging to the entrepreneur (also applies to vehicles rented under a lease or rental agreement),
- damages resulting from accidents caused by the entrepreneur,
- delays in the provision of a service or delivery of goods that exposed the customer to costs,
- Failure to provide services or goods,
- Unreliable execution of the order,
- Failure to meet warranty and other obligations.
The above list proves that doing business inextricably involves taking risks. However, the assessment of this risk is left to the entrepreneur himself – until the regulations clearly indicate that the area in which you do business is covered by mandatory company liability, the decision is yours.
