Navigating the insurance maze

A business lifeline or a necessary evil - whatever your view of insurance, it represents a significant line in every laboratory’s budget. Like every other business in the UK, laboratories have to ensure their premises are covered through buildings and contents insurance, but with the vast array of additional insurance covers available, what insurances do laboratories really need? Jamie Eaton takes us through it.

To help laboratories find their way through the insurance maze, we have put together an overview of the key policies that they have to have or that can provide a valuable business lifeline. We also take a look at how laboratories can safeguard themselves as much as possible against a claim – and what to do if the worst should happen.

Employers’ liability
This is designed to protect your business financially against claims made by employees for workplace accidents or work-related injuries or illnesses. Equally important, it provides your employees with a means of seeking recompense if an unfortunate accident does occur.

It is mandatory for laboratories to have £5 million of cover where a business has employees; however, in practice most insurers offer cover of at least £10 million. The policy will cover the cost of compensation or damages as well as any legal fees incurred relating to a claim.

The HSE enforces the law on employers’ liability insurance and HSE inspectors will check that you have arranged this insurance with an approved insurer. They will also ask to see your certificate of insurance which should always be displayed in your laboratory or office.

-mechanical
-electrical 
-chemical
-microbiological
-radioactive
-new technology
-unknown or poorly understood hazards
-spills

However, there are a few simple steps that laboratories can take to minimise the risk to their employees and lessen the opportunity for accidents to happen:

-Make sure hazards have been clearly identified.
-Conduct regular safety training and make sure staff attend.
-Ensure you have proper employee supervision in place.
-Implement a general level of housekeeping at your premises.
-Make certain that spills are cleaned up immediately.
-Include clear warnings around hazardous areas or equipment.
-Provide proper protective clothing and equipment for employees – and make sure it is well maintained and used.
-Enforce a “clean room” policy – less clutter means less risk.
-Regularly check the condition of outside areas such as the car park.

Public liability
A public liability policy will provide you with financial protection in the event your business is sued for injuring a member of the public, or causing damage to the property of a member of the public or another business.

With all the hazardous equipment that can be used within a laboratory environment, it is easy to forget the more simple hazards – however, two of the more common causes of visitors injuring themselves at a business premises are computer cables and slippery floors.

Your business is potentially more exposed if any of your testing is carried out away from the permanent laboratory, e.g. on the client’s site. You are equally at risk if you are storing, handling or transporting hazardous substances which could cause damage to nearby property or the general public.

The most common causes of claims under a public liability policy are from simple slips, trips and falls – and again, there are some easy steps that you can take to minimise the risk of a claim:

-Implement a general level of housekeeping at premises.
-Make certain that spills are cleaned up immediately.
-Include clear warnings around all hazardous areas or equipment.
-Provide proper protective clothing for visitors – ensure it is well maintained and ensure they use it!
-Do not allow clutter to build up – a “clean room” policy is recommended.
-Regularly check the condition of outside areas such as the car park.
-Ensure visitors are under constant supervision in potentially hazardous areas.

Professional indemnity
If your laboratory provides testing services, your client will be expecting you to provide them with accurate data that is used as a means of verifying the safety, reliability or efficiency of a product or process. You therefore owe a duty of care to your clients and you also have a wider duty to both the general public and the environment.

Any inaccuracies in your testing and subsequent reporting could result in injury to a person, damage to property or financial loss to your client. If you are found to have negligently evaluated a product or service you will be held partially or entirely responsible, and any resulting legal action can be costly both in terms of the expense of defending your business and the potential settlement figure – and can involve significant management time in preparing the laboratory’s response to the action. If the decision goes against you, it could well have a negative impact on your balance sheet – at worst, it could cripple your business financially and at best, it could cause untold damage to your reputation.

While not a mandatory requirement for laboratories (unless you are an accredited inspection body), a professional indemnity policy is definitely worth considering. It will protect you for any breach of your professional duty of care in the course of your business activities. The policy will not only cover the cost of damages awarded against you but will also cover the legal fees incurred in defending such a claim.

So how can you minimise your exposure to a claim of negligence? Here are a few top tips:

-Formalise and document standard operating procedures for all laboratory work.
-Validate test results by conducting a duplicate analysis.
-Regularly check all laboratory equipment for faults and ensure it is calibrated by a qualified. Professional - if equipment is faulty or has not been calibrated properly, it could affect test results and you could deliver an inaccurate report which could result in a claim.
-sterilise glassware after each use to avoid contamination from remaining residue.
-When presenting test results to a client make sure this is done in a way that the client perfectly understands the data in question – and establish a process to ascertain whether your client has in fact understood all test findings.
-Use standard terms and conditions and limit your liability under contract.

Risk Management
Sound risk management is the surest way of minimising your exposure to a claim. The very nature of the work undertaken by laboratories and the projects you are involved in carries the potential for catastrophic exposures. A small human error can lead to large financial consequences if these risks are assessed inaccurately or managed inappropriately.

Insurers are, in general, a nervous bunch and uncomfortable with covering unknown or unquantifiable risks. So what can a laboratory do to make sure they have good risk management practices in place and convince insurers that you are a sound, well-run business?

Good risk management falls out of good systems and procedures, and audit trails, record keeping and good housekeeping are all key aspects in maintaining good risk management systems.
 
This does not have to be over complicated. In essence, taking on risk is what makes a business profitable but it is necessary to demonstrate the supporting structure for that risk. Processes, health and safety and, increasingly, environmental risk management all make up part of a laboratory’s successful risk programme. These risks should be monitored to conform to standards, and evaluated regularly to keep aligned to changes within the business. An example of this may be a testing laboratory that wishes to start working with an unknown or poorly understood substance. Risk management is there to make this possible, not to stop it from happening, but the procedures in place must be adapted to manage the new level of risk effectively and therefore make the change profitable.

Not allowing a business to grow is unthinkable, but over managing risk can stop organic growth.

External assessment of risk management procedures and risk management workshops for your staff can help in getting the balance right. It is also important to make sure staff understand what risk management is, and what it means to them and the business as a whole. Remember that procedures can only be followed if everyone understands what they are there to achieve, and this is often best demonstrated by someone from outside the business. Your insurance broker or health and safety consultant are good points of contact for designing these strategies.

Another step that laboratories can consider taking is accreditation with the United Kingdom Accreditation Services (UKAS). Typically, the standards assessed as part of the UKAS accreditation process include:

-Staff competence.
-Working environment and equipment.
-Working methods.
-Processes to deliver continuous improvement and proof these are assessed regularly.
-Demonstration of understanding customers and their needs.
-Internal audits.
-Feedback mechanisms.

Insurers recognise that, through achieving UKAS accreditation, laboratories have demonstrated that they have the necessary systems in place to manage their risk effectively.

The claims process
Despite the best risk management practices, the sad fact is that we are living in an increasingly litigious society and clients and the public alike are more aware than ever of their ability to seek redress through the courts for alleged professional negligence, injury or property damage. If you do face a claim, you have two choices – act immediately and manage the situation from day one, or stick your head in the sand and run the risk of turning a molehill into a very large mountain.

To help you manage the process right from the start, here are some top tips to follow:

1. Notify your insurance broker immediately, whether or not you consider the potential claim to be groundless. The sooner your broker is aware of and understands the situation, the sooner he or she can start working with you to present the claim to your insurer; the longer you leave it, the bigger the molehill will become.

2. Know what your policy covers and consult with your broker – after all, he or she put it together on your behalf!

3. Start collating all the relevant information to prepare a notification to your insurer. Your broker should help you with this, but some basics include:
– the date on which you first became aware of the situation
– details of the claimant
– a description of the allegation or possible claim and a summary of events to date
– copies of any relevant documentation and correspondence
– an indication of the potential amount involved

4. Stay in constant contact with your broker, ensure he or she has access to all the necessary information and people – and make sure he or she keeps you up-to-date on progress

And, just as importantly, here are a few tips on what not to do:

-Don’t admit liability.
-Don’t make any offers of settlement without consulting your broker and getting your insurer’s consent.
-Don’t take any other action that may prejudice your insurer’s position.
-Don’t incur any legal expenses that you would wish to recover from your insurer without their authorisation.
-Don’t tell claimants that you are notifying your insurer - this could well lead to an immediate case of “deep pocket syndrome”.

Managing a claim, or a potential claim, can be a nerve-wracking process, but following the above steps should help ease the situation.

Insurance does not have to be a maze to navigate through but hopefully this overview will give you some help in finding your way through to determining what cover you need and what you can do to minimise the risk of a claim. And don’t forget your insurance broker is there to help guide you through it at every step of the way.

By Jamie Eaton. Jamie is Business Development Manager of the LABsure team at Howden, a leading Lloyd’s insurance broker.

Contacts:
t: +44 20 7648 7210
e: labsure@howdengroup.com