Public Liability Run-off Cover Most trade business owners will know what public liability insurance is, but have you heard of run-off cover? It’s a big deal, but one that doesn’t get spoken about much when it comes to tradies. It can result in a big claim being declined if you don’t get it right though… Run-off cover is only applicable for someone cancelling or not renewing their insurance, and not replacing it with another policy. If you’re not planning on cancelling or letting your policy expire, you can save yourself some reading as this won’t be applicable to you.
So what is it then?
To understand what run-off cover means to a trade business owner, first you need to understand how a public liability insurance policy works. Public liability is an occurrence-based form of insurance. This means that to make a claim, you must have a current policy at the time that the incident occurs. Many incidents will occur whilst you are working, therefore having a current policy at the time of undertaking the work is important.
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However not all incidents occur at the time of doing the work. If an incident occurred a few months after you undertook the work, and by then you had cancelled your policy, you would not be covered. Run-off cover is a form of insurance that allows you to remain protected even after you’re no longer running your business.
What if I’ve closed or sold my business?
You might think that once you close or sell your business that you can wipe your hands of any liability, but that is not always the case. The next section has been put together as a general guide, but we strongly recommend you obtain legal advice before making any decisions on risk exposure. If you operate as a Pty Ltd company and close it down completely, going through the full deregistration process, you might remove any liability, provided that the work was undertaken whilst operating as a company. But you must fully deregister the company. If you cease trading, but still leave the company sitting there, then the company can still be sued at any time and you’ll be left exposed.
