Overlooking the business description
Business descriptions are one of the most important things which you have on an insurance policy. They represent what an insurer believes you as a business undertake in your activities, it also represents the scope of what they are prepared to cover you for.
Insurers in Australia use what is called an ANZSIC code to classify your business activities, and, like most things within the insurance industry it is not as simple as it may seem. Activities which you feel are part and parcel of your role could fall outside of the activities covered by this code i.e. accountants whom give investment advice. This week we had an example of this and what happens when the business description is overlooked, the details of which
are as follows:
Client was a carpenter;
They had their Public Liability insurance with the same (direct) insurer for fifteen years, the business description used was ‘carpenter’. Unfortunately whilst they had started out solely as a carpenter their business had expanded to include general building and also site project management;
An incident had occurred where there had been a partial collapse of a wall. The activities being undertaken within the job where not only carpentry but also site management and also undertaking general building work (excavations for footings);
The business description and that of the ANZSIC code where not wide enough to provide cover for the activities and the insurer had initially declined the claim leaving the business liable without insurer assistance
This story did have a positive outcome as the client appointed us to run the claim for them and discuss with the insurer. We managed to get the insurer to indemnify the client as upon further inspection of the business description there was cover in place for installation of formwork, which was the purpose of the excavations. We are now working with the client to put in place a correct policy and to utilise ourselves as their broker and not rely on direct insurers.
This incident though highlighted a number of points that are relevant to all businesses and here are the three key ones which all businesses, regardless of size, should look into:
Check your business description which is noted on your schedule of insurance, are you aware of what the scope of cover is of this description? Have you checked the exclusions of the policy to make sure that cover is being removed which you thought was /should be there?
Review your business activities regularly. Since you took out the policy have you added any services to your offering as a business? If you have are they covered by the insurer under this policy? Finally
Placement of insurance can be complicated, after all you don’t know what you don’t know, as such consult with an insurance broker. It is their job to handle insurance policies and make sure that all business activities are covered. Yes you may save a few dollars handling it yourself but if it is placed incorrectly then the results can be devastating for your business;