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Commercial third-party liability insurance has the same purpose as personal liability insurance, its equivalent for private individuals: It protects a company against the financial consequences that may arise if it unintentionally causes damage to its customers or other external persons. It is one of the voluntary types of business insurance, but is worthwhile for every company that can be held liable based on its operational activities. And this could be practically every company, irrespective of its corporate form: From the self-employed and SMEs to companies of every size.
In Switzerland, commercial third-party liability insurance is not prescribed by law. However, depending on the industry and its risks as well as the canton, it may ultimately be obligatory. For instance, such coverage may be required for tenders for contracts.
The insurance covers the operational and professional activity of natural persons and legal entities, partnerships, corporations, and institutions. Business proprietors and all employees, representatives and support staff alike are insured against bodily injury or property damage as well as consequential economic loss suffered by third parties.
Within the scope of operational activity, commercial third-party liability insurance covers financial claims that can be asserted against your company based on statutory liability provisions. For instance, maybe a visitor to your premises becomes injured or a defective component is installed and causes water damage to your most important customer. The commercial third-party liability insurance protects you against claims that upon review prove to be excessive or unjustified.
The basic coverage of commercial third-party liability insurance provides protection against the following damages and risks, and covers justified claims from the following:
Bodily injury: This is defined as causing the death of or injury or other health impairments to other people.
Property damage: This includes the destruction, damaging or loss of property belonging to third persons.
Consequential economic loss: This term means financial losses that are the result of insured bodily injury or property damage.
Premises risk: This refers to the risks posed by your property, operating facilities, or premises. Regardless of whether you rent, lease, or own: The responsibility lies with you, if, for example, a non-employee falls down the stairs of your company.
Occupational risk: Losses resulting from operational activity are included in occupational risks. If a technician damages the countertop when installing the dishwasher, it must subsequently be replaced.
Product risk: Regardless of whether a development, construction, production, or instruction defect: If a product made at your company injures or even kills someone or damages or destroys the property of a customer, the damage or loss is insured.
Incidental risk: Even so-called incidental risks are covered by liability insurance. These include company celebrations and all other company events, cafeterias, and other social institutions for employees, as well as the activities of company clubs and associations.
Environmental risk: Risks that cause a threat to the environment as the result of a suddenly occurring, unforeseen event are also covered by the insurer. For example, if fuel leaks from a construction crane and contaminates the neighboring property. However, gradual damage that occurs over a long period of time is excluded.
The following are generally not covered:
Operational risks can vary greatly from industry to industry. A car repair shop is exposed to different risks than a hair salon, which is why it is always advisable to obtain a precise risk analysis. This way you can supplement your commercial third-party liability insurance in a targeted way to cover the individual needs of your company.
By supplementing your coverage, you can include special risks in your commercial liability insurance, meaning more comprehensive protection of your company. Here are some examples:
Both insurance types overlap in some areas. The difference: Companies that can be held liable on account of their operational activity need commercial third-party liability insurance, while professional indemnity insurance is the right solution for those who can be held liable for breaches of professional duty or for pure economic loss caused by their professional activity.
Policyholder and premium payer is the employer as a legal entity. However, the de facto directors and officers themselves are covered. So, for example, the board of directors of a joint-stock company, members of the administration of a cooperative, the managing director of a limited liability company, members of the board of directors of associations, trustees, family members of the executive management and senior management (incl. interim management), founders of a limited liability company or joint-stock company, employees who are in a de facto director or officer role or liquidators in the event of a voluntary liquidation. You can find more information on directors' and officers' liability insurance here.