Liability insurance

What it means

Liability insurance covers harm the company causes to a third party: through its operations, its products, defective work or property taken into its care.

It also pays the cost of defending a claim that turns out to be unfounded. In practice that is as valuable as the indemnity itself, since legal representation costs money from day one.

What matters is which moment the cover attaches to. Under one basis it is when the damage occurred, under the other when the claim was made. Changing insurer or ceasing business can open a gap: a claim over work done years ago is brought before limitation runs out, but the old policy has lapsed and the new one does not respond.

How it works in practice

The scope follows what the company does: product liability when selling, liability for work performed under a contract for work, and for goods held in service or storage.

Customers increasingly require it in the contract with a specific sum insured. A certificate of insurance is becoming a condition of signature rather than a nice extra.

When working with subcontractors it pays to require their liability cover too. If a subcontractor causes the damage, the customer claims against the company it contracted with, which then has to recover from the subcontractor. Without the subcontractor’s policy, recovery depends on whether it has the means to pay.

What to watch out for

Exclusions matter more than the limit: pure financial loss, consequential damage, fines and contractual penalties are often outside cover. Professional indemnity is a separate policy.

Territorial scope is often limited to Slovakia or Europe. A company that starts installation work at a customer abroad or begins exporting products outside the EU can find itself uncovered even though the premium is paid. So the policy wording is reread every time a new market opens.