Personal liability for our actions, or lack of action, is becoming an ever-increasing problem. In business, we used to believe that we could protect ourselves by taking out insurance to cover the usual risks, such as responsibility for personal injury or death of an employee, or a customer’s financial loss due to our negligence. However, this comfort blanket is dependent upon insurance being available and upon its upper limit being enough to cover all of the claims.
Liabilities are surfacing within a whole new spectrum of our social structure. Discrimination claims against employers can involve massive awards of compensation and, in some cases, will bring down an entire business. Breaches of developing legislation involving health and safety issues, data protection, money laundering and a whole host of other laws designed to create blame where something has gone wrong, are ignored at our peril. The new Bribery Act, which will be implemented later this year, will make employers liable to criminal charges if their employees give or receive back-handers. How far can insurance protect us against such liabilities of this modern world?
Liability is not only restricted to businesses. Many individuals face personal liability without even realising it. Those who should take note of these words of warning include:
- Trustees and committee members of political, sporting and other clubs and societies. You may have an indemnity out of the assets of the club but is that enough if a club employee pursues a tribunal claim?
- Charitable trusts – the fact that you are doing this for no personal reward does not exclude liability
- Professional partnerships such as architects, surveyors, estate agents, accountants – and indeed, solicitors. In addition to the general exposure to liability, you also have strict professional rules, the breach of which can involve sanctions, including substantial fines. As an example, the newly appointed Legal Ombudsman has the power to award compensation up to £30,000 against those involved in giving legal advice.
- Sole traders and partnerships. This group would also include those buying land or property together. Empty rates liabilities or contaminated land problems can turn a perceived asset into a substantial liability overnight.
I doubt you will ever remove every possible line of attack but you can give yourselves the chance of walking away from the problem by moving your activities into a limited liability company or limited liability partnership. There are tax implications of doing so and the practical issues surrounding such a move may make you wonder, at times, whether it was worth it. However, if you want to protect your home and avoid county court judgments, now is the time to review the whole situation, take advice on what is involved in such a conversion – and either do something about it or go on as you are but with the knowledge of what you are letting yourself in for. Please remember that if a liability arises, it is usually too late to do anything about it.
To contact Raworths, telephone 01423 566666 or visit our offices at Eton House, 89 Station Parade, Harrogate HG1 1HF. Alternatively you can email simon.morris@raworths.co.uk
