There is a thriving claims culture within the UK, where everyone seems to expect that if they are injured or suffer financial loss, they will be able to find someone else to blame and seek compensation from. ‘Accidents’ simply don’t seem to happen anymore, whereas incidents of ‘negligence’ abound.
This culture is fuelled by the ready availability of no win, no fee funding arrangements with solicitors and claims handlers creating a situation whereby a person has nothing to lose and everything to gain by making a claim for compensation, particularly against a business (since businesses are seen to have deep pockets compared to individuals).
Even if a claim is ultimately unsuccessful, the person seeking compensation has nothing to pay, since their insurance policy (linked to the no win, no fee agreement) will pay for the business’s legal fees. However, if you run a small business or start-up and are on the receiving end of a court application for compensation there are no similar no win, no fee agreements readily available for you to defend yourself with. You will usually have to pay for your own legal costs to defend your case throughout the course of the court proceedings and these alone can add up to tens of thousands of pounds. If you lose, you also face paying the legal fees of the claimant plus the amount of compensation ordered by the court.
If you have registered your small business or start-up as a limited company then if you had no insurance in place to cover this type of situation the only assets that the court and claimant could touch would be those belonging to the company (e.g. any equipment, plant and machinery, tools, premises). That would seriously impact on your ability to trade, of course, but at least your personal assets would be safe.
On the other hand, if you are not a registered limited company, your personal assets are also fair game which the court can order be liquidated (i.e. sold off) in order to pay the compensation and legal fees if necessary.
Whilst insurance and being sued might not be the first thing you think of when setting up a business for the first time, you should start searching for cover as soon as possible in order to protect yourself from the worry and expense that remaining uninsured can lead to.
Whilst it would be useful to have a crystal ball to see into the future with, to see if you will ever have a claim brought against your business, that’s just not going to happen so all you can do is weigh up the odds of being sued against the risks and costs involved and the relatively small cost of a public liability insurance premium. If you come into contact with anyone as part of your business, public liability insurance really is a necessity because you can pretty much guarantee that if someone is injured or has their property damaged or destroyed, they won’t think twice about seeking recompense from you. They will assume that you have insurance in place (and indeed many customers, particularly other businesses, will expect you to have public liability insurance in place as a matter of course).