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Legal liability

The policy only responds to legal liability. Ex gratia payments or sums paid for commercial expediency are not covered.

The underlying purpose of the policy is to cover tortious liability in negligence, not general contractual liability, although strict liability under the Consumer Protection Act 1987 is included. Some policies also cover contractual liability where there is a parallel tortious duty.

To a third party other than an employee

Liability to employees is invariably covered separately by compulsory Employers’ Liability insurance.

Damages/compensation

Whether exemplary or punitive damages are covered, it depends on the wording of the policy. Exemplary damages are generally covered unless specifically