Liability insurance

Liability insurance

Liability insurance covers liability claims from third parties. In some professions, liability insurance is necessary and sometimes even mandatory. Consider professions such as a notary, doctor, or directors of listed companies. Liability insurance covers, among other things, negligence, errors, omissions, and breach of obligations.

In the policy conditions, the insurer includes the relevant general provisions. These therefore specify which types of damage the insurer covers. In addition, the rights and obligations of the policyholder are included in the policy conditions. Furthermore, any maximum limit on the compensation payable is included in the policy conditions. The policy conditions are always part of the policy that an organization receives when taking out insurance. At the time of taking out insurance, it is important that the conditions are subjected to a legal review. Our legal specialists can provide support in this regard. Additionally, an analysis can be conducted to determine whether the damage suffered is covered under the policy conditions.

A dispute may arise between the insurer and the insured regarding the damages to be paid and the amount thereof. The policy conditions specify which damages an insurer is required to pay. However, in certain cases, a dispute may arise concerning the interpretation of the policy conditions. Our practice group possesses the legal expertise and practical experience to provide support in such a conflict. This means that our lawyers and legal experts can offer assistance in negotiations with the insurer. If these negotiations are unsuccessful, an attempt can be made to enforce the payment of damages through the courts

We have the knowledge and expertise to assume diverse roles: from advice to dispute resolution. We have an experienced team of lawyers and legal experts in the field of liability law. Contact us to discuss the possibilities.

The different liability insurance policies at an overview

In practice, various products, each with its own coverage, fall under the umbrella term “liability insurance.” Choosing the right insurance prevents a claim from unexpectedly falling outside the policy. The main variants are:

• Business Liability Insurance (AVB) – covers damage to property and personal injury caused to third parties by your company or employees, for example due to an accident in the workplace or a fallen scaffold.
• Professional Liability Insurance (PLI) – covers pure financial loss resulting from a professional error, such as incorrect advice or a calculation error. You can read more about this on our page about professional liability.
• Directors' and Officers' Liability Insurance (D&O) – protects directors and supervisory board members against personal liability for improper performance of duties. See also directors' liability.
• Product liability insurance – covers damage caused by defective products that may rest with the producer independently of fault.

This distinction makes the difference between a covered and an uncovered claim. Whether you are an international group or the baker on the corner, our lawyers and in-house counsel help you determine which coverage suits your activities and risk profile.

The claims made principle: run-in and run-out coverage

Many professional and directors' and officers' liability insurance policies operate on the claims-made principle. Coverage then arises at the moment the claim is reported to the insurer during the term of the policy – ​​not at the moment the error was made. This has two important consequences:

• Retroactive coverage – covers claims arising from errors prior to the policy's effective date, but which are only reported during the policy term. Without retroactive coverage, such an old error falls outside the policy.
• Run-off coverage – covers claims reported after the end of the insurance period, for example following business closure, an acquisition, or retirement. Run-off is crucial, particularly in the event of a strike or transfer.

When assessing policy conditions, we pay close attention to this structure. A gap in retroactive or retroactive coverage often only becomes apparent at the worst possible moment: when the claim has already been received.

Legal framework: when is liability insurance mandatory?

Liability insurance is not legally mandatory for most entrepreneurs, but is often enforced by clients, suppliers, or trade and professional organizations. However, a statutory (disciplinary) insurance obligation does apply to certain professional groups. For instance, lawyers are required under the Regulation on the Legal Profession to be adequately insured against professional liability, with a minimum insured amount per claim. Similar requirements apply to notaries, accountants, and other regulated professions.

The insurance contract itself is regulated in Title 7.17 of the Dutch Civil Code. Article 7:925 defines insurance, while Article 7:941 of the Civil Code obliges the insured to report a realized risk to the insurer as soon as possible. The underlying liability usually rests on Article 6:162 of the Civil Code (tort) or Article 6:74 of the Civil Code (failure to perform a contract). If you want to know where your liability comes from, please read our pages on liability arising from tort and liability arising from contract.

Enforce a coverage dispute with the insurer

Is the insurer refusing to pay out or offering less than you expect? Then everything revolves around the interpretation of the policy conditions. In practice, an insurer often invokes an exclusion, a late notification (Article 7:941 of the Dutch Civil Code), or a breach of the duty of disclosure. Our approach is step-by-step:

• analysis of the policy, the damage and the grounds for rejection;
• negotiation with the insurer or their claims adjuster;
• if necessary, a complaint to the Financial Services Complaints Institute (Kifid) or proceedings before the civil court to enforce the payment.

Our lawyers and in-house counsel know the rules of the game among insurers and can substantiate the amount of damages and the claim for compensation . In this way, the balance of power between you and the insurer shifts in your favor.

Frequently asked questions about liability insurance

What is the difference between General Liability Insurance (AVB) and Professional Liability Insurance (BAV)?
General Liability Insurance (AVB) covers property damage and personal injury to third parties; Professional Liability Insurance (BAV) covers pure financial loss caused by a professional error, such as incorrect advice. Many service providers need both.

My insurer is rejecting my claim. What can I do?
Have the rejection legally reviewed. Often, the exclusion or the late notification defense is challengeable. We can negotiate and, if necessary, initiate proceedings at the Kifid or the court.

Am I closing down my business or transferring it – what do I need to arrange?
Check whether your policy offers run-off coverage. Without run-off, claims received after termination fall outside the coverage, even if the error was made during the policy term.

Liability, damage and insurance

Liability insurance is one part of our broad Liability, Damages and Insurance. Within this area of ​​expertise, we advise on the entire chain: from preventing and assessing liability to recovering or defending against damages and enforcing insurance payouts. Whether you manage an international group or work as an independent entrepreneur – our mixed teams of lawyers and in-house counsel are ready to assist you. Please feel free to contact us to discuss your situation.