When talking about liability insurance, it is normal that many doubts arise. In addition to being a large and complex subject, there are many variations of civil liability (CR) and each one can have its own specific insurance.
Sometimes this type of insurance will be compulsory by law in our country, as in the case of cars and motor vehicles, and in others not. But very often they are included as guarantees in certain types of policies, such as household or SME insurance.
In this article we will try to solve your doubts about the legal concept of civil liability, the definition of civil liability insurance, the types of insurance, as well as when it is obligatory to take it out. Let’s start.
What is liability?
The concept of civil liability in legal terminology derives from articles 109 to 122 of the Criminal Code, and is the same as that provided for in articles 1902 and following of the Civil Code. The Civil Code says exactly: “Whoever by action or omission causes damage to another, intervening fault or negligence, is obliged to repair the damage caused”.
According to this definition, we can simplify by defining civil liability as
Legal obligation to respond economically, through compensation or repair of damages, for those acts performed that have caused material or personal damage or harm to a third party.
Normally the person who caused the damage is the one who must respond to third parties, but there are occasions when the person responsible is different from the person who caused the damage. This is called “liability for the actions of others”. For example, when parents are held liable for damages caused by their minor children.
Contractual and non-contractual civil liability
Sometimes a distinction is also made between contractual civil liability and non-contractual civil liability. Contractual civil liability is where the damage derives from the breach or transgression of a contract, for example, in the failure or delay of delivery of a work.
We will speak of extra-contractual civil liability when we have to respond for a damage or harm caused regardless of the existence or not of a legal relationship or contract between the parties.
What is Liability Insurance?
We can define civil liability insurance as insurance that meets the legal obligation to respond to personal or material damages caused to third parties.
Therefore, by means of a CR insurance the insurance company will cover economically and legally the insured, against the damages that this one causes involuntarily, in all those cases and conditions specified in the policy. It is common to cover mainly non-contractual civil liability.
It is very important that you take into account and review certain aspects in your policy. For example, whether the capital sums (maximum compensation amounts) are sufficient, as well as the situations or cases that your insurance would cover and those that it would not.
Types of liability insurance.
There are a multitude of CR insurance policies depending on whether the insured is a natural or legal person, the scope of action, the type of damage to be guaranteed, etc. But to better understand this typology, we can group them into four large groups:
Civil liability insurance for individuals, professional liability insurance, corporate liability insurance and liability insurance for directors and executives.
CR Insurance for Individuals (Private CR).
All those insurances or guarantees of individual or family civil responsibility that are in charge of protecting the insured and/or his/her family within the private scope. The most common insurances that include this coverage are the home insurance and the car insurance.
In short, they are insurances oriented to protect the involuntary damages caused by your private life and/or that of your family, (leisure, properties, vehicles, pets, etc.)
Professional Liability Insurance.
With this type of insurance, the insured, whether they are companies or individuals, protect their assets by covering possible compensation for damage caused by a business or professional activity.
It mainly affects liberal professions that may cause material or personal damage or pure damage, understood as those that do not derive from a previous personal or material damage.
For example, an architect coordinates a work where a pillar is erected on a site that does not correspond. Although no previous material damage has been caused, the costs of relocating the pillar constitute a primary patrimonial damage or pure prejudice. This type of damage is only covered by this type of insurance.
It is common for professionals and professional/business activities that need this type of insurance to have a specific regulation regarding liability. For example, architects and travel agencies.
CR insurance for companies and freelancers.
These insurances guarantee the civil responsibility derived from personal and/or material damages caused to third parties in the normal development of an activity.
For example, damage that may be caused by an installation company during installation or damage that may be caused by a product due to poor manufacture. It is very important that the guarantees contracted are in line with the activity and real needs of the company. To give some examples:
- A company with workers must have insurance for civil liability arising from accidents at work or employer’s liability.
- Self-employed workers or installation companies must be guaranteed against damage caused during the installation process and afterwards.
- Companies susceptible to contamination must consider this risk in their policy.
- If the company manufactures and exports, it must have guaranteed product liability with international coverage.
CR Insurance for Administrators and Executives.
The aim of this insurance is to protect the personal assets of directors, managers, partners, etc… for claims relating to mismanagement, which may have caused damage to the company. The activity of “administrator” of a company is an important source of responsibilities.
Many of them are regulated in the Spanish Companies Act and other commercial regulations. It is common to find guarantees as important as “improper employment practices” or “negligence in the compliance with the LOPD”. Finally, it is also worth noting that “corporate responsibility” can be guaranteed, that is, when the company and not its directors must respond.
Is liability insurance mandatory?
There are specific civil responsibility insurances, and it is usual that the rest of the insurances have CR coverage (like home, car, etc.). Having said that, there will be cases where it is totally obligatory to contract such guarantee and cases where it is not. However, it is always advisable to take it out, and to do so without skimping on the capital, as there are many situations where we might need it.
Below you will find the most common compulsory civil liability insurance in Spain. In most cases they refer to motor vehicles, companies and self-employed people, and very specific activities that involve certain risks:
- Motor vehicles.
- Recreational or sport boats.
- Companies and professionals (some activities).
- Environmental CR for companies (some activities).
- School transport and transport of minors.
- Potentially dangerous breed animals.
- Hunting and fishing.
Conclusions on the importance and obligatory nature of this type of insurance
As you can see, civil liability insurance is not compulsory, except in specific cases where the law requires it, as we have explained. We insist that it is always convenient to have this type of insurance, since in a situation where we have to respond, the amounts could be very high.
If you are self-employed, or have a company, it is highly recommended, and sometimes mandatory, that you take out specific insurance to cover claims arising from your activity. If you are a private individual, as you probably have a home insurance, make sure that the liability capitals of your policy are sufficient.
Finally, if you have a vehicle, you are obliged to have civil liability insurance (this is the only compulsory guarantee for car insurance).