Liability insurance is one of the things we often neglect. However, in many cases it is a very useful tool that can help us avoid serious financial problems due to common life situations. Whether it’s a colleague’s mobile phone breaking at work or a cyclist being hit on holiday in the Alps. It is liability insurance that can mitigate the impact of such events. In this article, we’ll give you an overview of what this type of insurance entails and when it’s worth taking it out.
Liability insurance in everyday life is a contractual insurance policy that covers damage you cause to third parties. So if you unintentionally cause someone else to suffer injury to their health, property or finances, the insurance company will pay for this damage on your behalf. Within the agreed terms, of course. There is always a deductible in the policy.
There are typically two basic types of liability insurance. The first is liability insurance in ordinary civil life, this covers everyday life outside work or business. The second type is then workers’ compensation insurance, which covers damages caused in the course of employment. We will now focus on civil liability, that is, situations that can easily happen to any of us.
Liability insurance has its legal basis in the Civil Code, specifically in Section 2894 et seq. The law distinguishes several types of liability that you can insure. These are:
The basic principle is simple: If you cause harm to another by breaching your legal duty, you must compensate for that harm. And this is the risk you can insure against, so that the insurance company will eventually pay for the damage on your behalf.
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Public liability insurance covers damage caused unintentionally by you, your child, an animal or an object in the normal course of your activities. So, typically, this includes situations such as when your child is playing ball and breaks a neighbour’s window. Or when you knock over a glass of red wine on a new expensive sofa while visiting friends. Or when your dog pulls the leash off, runs into the road and causes an accident. But you’ll also appreciate liability insurance if you hit another skier on the slopes while on holiday.
In these cases, the insurance covers compensation for the injured party (whether an individual or a legal entity), any legal costs if you can’t reach an agreement together and your dispute goes to court.
This insurance usually covers the whole household, meaning you can arrange for the policy to cover not only you as the main insured, but also your spouse (registered partner), children living in the household (often if they are studying outside the household) and pets (if they are named in the policy).
The scope of cover is normally in the millions of crowns, and the amount of the limit will normally have a major impact on the premium.
If the circumstances of the case or the customs of private life so require, everyone is obliged to act in such a way as to avoid unjustified harm to the liberty, life, health or property of another.
Not all claims are automatically covered. Insurers usually make exceptions in their terms and conditions, which you should read carefully before signing the contract. The most common exclusions include:
We also strongly recommend checking whether the liability insurance you have taken out applies outside the Czech Republic. Because if you are travelling abroad (for example, to ski in Austria), then causing damage (for example, an accident to another skier) can complicate the whole situation considerably if you do not have adequate insurance. However, most modern liability insurance policies are now valid throughout the European Union, some even worldwide.
One minute you may be enjoying a party when visiting friends and the next you may be dealing with the fact that you accidentally dropped a glass of red wine on a light wool carpet your friends brought back from their holiday in Morocco. However, the stain cannot be cleaned and the carpet has deteriorated, so your friends are claiming damages of CZK 30,000. Liability insurance covers the payment of the damage in this case. The insurance company will reimburse the damage after reporting and supporting invoices, saving you a lot of money and good relations.
Your 10-year-old child is visiting a classmate. While playing with a ball, he hits the LCD TV, which shatters. The parents claim damages of CZK 18,000. Thanks to public liability insurance, the damage is covered – the insurance company will pay the full amount to the victim. If you didn’t have insurance, you would have to pay the compensation out of your own pocket.
While walking your dog, your pet escapes from its leash and runs into the road. The driver, in an attempt to avoid a collision, jerks the wheel and damages their car. The cost of repairing the car and towing it away is almost CZK 70,000. As you have public liability insurance, the insurance company will cover the entire loss for you. This type of policy also covers damage caused by pets.
Tip: Spilled coffee on your laptop or crashed company car? These are also situations that employee liability insurance can help you out of. Read more about it in our article.
You fail to brake on a cycle path and hit a passing cyclist. The cyclist has a broken collarbone and a damaged bicycle. The treatment and the repair of the bicycle cost more than CZK 100,000. If you did not have liability insurance, you would have to pay for everything yourself. Because you are covered, the insurance company will take all the costs for you.
While moving furniture, you accidentally hit a corner of a cabinet into your neighbor’s parked car, causing a dent in the door. The repair will cost CZK 12,000. If you have public liability insurance, the insurance company will pay for the damage and you will avoid disputes with your neighbour.
During a winter holiday in Austria, you accidentally hit another skier on the slopes and break your leg. The cost of treatment, hospitalisation and lost wages will run into several thousand euros. Because your liability insurance is valid abroad, the insurance company will cover all costs. Without insurance, you would face not only financial costs but also possible criminal charges.
If a situation arises that could be covered by insurance, act immediately. First and foremost, document the damage immediately and secure any witnesses. Then contact the insurance company, which you should usually do within three working days. You will then fill out a damage report form and provide the necessary documents (invoices, estimates, medical records, photographs, etc.). Then it’s the insurance company’s turn to review your case and decide on a possible claim.
Public liability insurance is voluntary but very useful insurance that covers injuries you unintentionally cause to third parties – whether you, your children, pets or things in your home. This could be damage to someone else’s property, personal injury or financial loss, for example if you spill wine on a valuable carpet, break a TV, hit a cyclist or cause a road accident with your dog. Insurance covers compensation for damages, often including legal costs, and usually covers all members of the household. Exclusions include damage caused deliberately, by drink, in the course of a job or between household members. The agreed cover should also apply abroad, ideally across the EU or globally. Insurance has a legal basis in the Civil Code and serves as protection against unexpected financial expenses and unnecessary litigation.
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Ondřej is the attorney who came up with the idea of providing legal services online. He's been earning his living through legal services for more than 10 years. He especially likes to help clients who may have given up hope in solving their legal issues at work, for example with real estate transfers or copyright licenses.
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