Start Up & Liability Insurance

[Jaimeweb]

Hi,
I realise there’s a number of posts around this subject but I thought I’d explain my business plan here to gather some view points.

Myself and my business partner are thinking to start a online business selling home use, small 6ft and 8ft domestic bouncy castles for children aged 3+ to UK customers only.
The kind you see in Argos, Smyths and Amazon for example: https://www.argos.co.uk/product/3678604

These are strictly for home use only, not commercial or rentals.

They conform to UKCA standards and have been EN71 tested.

We have been in touch with all the relevant UK bodies that regulate the commercial site of bouncy castle hire who all state that home use castles do not fall under their remit and they have no problems with the business plan.
We’ve also spoken with HSE and Trading standards who have confirmed they are happy with our extensive instruction manual, warning labels and that we comply with the regulations we need to.

The castles are manufactured by a large well established China manufacturer who has exported commercial and home use castles to EU and US customers for the past 16 years.

My problem seems to be getting product / public liability insurance.
Of course the mainstream company’s shut off at the word bouncy castle.
I’ve been in contact with about 20 insurance companies now with no luck.
It’s in the hands of a few brokers at the moment but I’m not optimistic.

One broker said something about approaching an insurer that’s located outside of the UK as they have greater appetite?! But didn’t give any names.

I do have a right of recourse document in place between ourselves and the manufacturer. Although I do read that these are something not worth the paper they are written on.

I should also say that we are a LTD company, and that we would not open the boxes or alter them in anyway from when they arrive from the manufacturer to when we dispatch to our customer.

There are some companies in the UK doing this already, quite large companies, so how are they getting insurance?!

From a safety point of view, there’s no sharp objects, nothing can be swallowed, its very clear about adult supervision etc. Passed all tests. I’m not sure how someone could sue for anything!?
And if they did how can it be proven that there wasn’t 30 children on the castle at the time which caused the problem.

Any help or advice would be greatly appreciated.
Thanks

 

[Frank the Insurance guy]

Hi @Jaimeweb

Good to see that you are already working with some brokers. Hopefully these have access to Lloyds of London market where it is most likely you will get a quote.

I think the main issue here is the premium and what is viable for your business - can you afford to pay £5K+ (although most underwriters at Lloyds of London will not quote less than £10K!)

As you have found, there is little appetite from insurers for the insurance you seek = few insurers will provide a quotation + higher premiums.

Insurance is not an issue for big firms as they can afford the premiums!

I see you've already approached 20 insurance companies and a few brokers. Unfortunately this can be counter-productive - some insurers will decline to quote if they see the same enquiry from more than 1 or 2 brokers,

Members Tip on working with more than 1 insurance broker
Ask each broker what insurers/underwriters they will approach and share the list with the other brokers asking them to not contact the sames ones!

 

[Jaimeweb]

Hi @Jaimeweb

Good to see that you are already working with some brokers. Hopefully these have access to Lloyds of London market where it is most likely you will get a quote.

I think the main issue here is the premium and what is viable for your business - can you afford to pay £5K+ (although most underwriters at Lloyds of London will not quote less than £10K!)

As you have found, there is little appetite from insurers for the insurance you seek = few insurers will provide a quotation + higher premiums.

Insurance is not an issue for big firms as they can afford the premiums!

I see you've already approached 20 insurance companies and a few brokers. Unfortunately this can be counter-productive - some insurers will decline to quote if they see the same enquiry from more than 1 or 2 brokers,

Members Tip on working with more than 1 insurance broker
Ask each broker what insurers/underwriters they will approach and share the list with the other brokers asking them to not contact the sames ones!

Hi frank,
Thanks for you reply.

Im sure that a couple of the brokers who have already come back to me mentioned Lloyds. So if they’re my best shot it’s probably not going to happen.

I hear from a few brokers that this is the case with a lot of company’s as like you say, the appetite isn’t there. And they are simply “self insuring”. But what exactly does that mean.

From all the research, documentation and precautions we’ve taken, would we will studio to continue without insurance?
And could insurers possibly reconsider after a year or so of trading?

 

[Frank the Insurance guy]

I hear from a few brokers that this is the case with a lot of company’s as like you say, the appetite isn’t there. And they are simply “self insuring”. But what exactly does that mean.

"Self insurance" just means that they will take on the insurance risk themselves - ie. they do not buy insurance and the business will then need to deal with and fund any claims.

Have you set up a Ltd company? A Ltd company will provide a great deal of personal protection as claims will generally be made against the Ltd company and not you personally. If you are trading as a partnership then your own assets (including home) would be at risk if you have to pay a claim!

Note - even under a Ltd company it is not 100% safe and you may be found personally liable, particular if their is evidence of gross negligence on your part.

From all the research, documentation and precautions we’ve taken, would we will studio to continue without insurance?

Insurance is optional, other than Employers Liability which is a legal requirement if Ltd company.

And could insurers possibly reconsider after a year or so of trading?

It certainly helps if the business has been trading for 2 years with a good record, but you will still have the issue of whether the premium would be viable - for what you are selling there is likely to always be a limited insurance offering.

 

[Jaimeweb]

Thanks Frank.
Yes, the Ltd company has been setup.
I guess when you say "evidence of gross negligence" this is determined by if we for example hadn't got

• comprehensive instructions
• warning labels
• safety test certificates
• not modify the item in any way
• checked with trading standards, HSE etc.

Of which we have all of.
I guess this clearly demonstrates that we have taken every precaution possible.

 

[Frank the Insurance guy]

I guess when you say "evidence of gross negligence" this is determined by if we for example hadn't got

• comprehensive instructions
• warning labels
• safety test certificates
• not modify the item in any way
• checked with trading standards, HSE etc.

Of which we have all of.
I guess this clearly demonstrates that we have taken every precaution possible.

I really couldn't advise on that - it is more a legal position of what is Gross Negligence than insurance, sorry.

It certainly seems sensible that you can demonstrate you have taken precautions though!

 

[Jaimeweb]

Thanks Frank, very helpful.

If anyone else can add anything to this it would be greatly appreciated.

 

[The Resolver]

Gross Negligence is not generally regarded in the UK as something distinct from ordinary negligence unlike in other countries such a the US where it can be used to trigger higher levels (punitive) of damages. The term can however be used in a loose sense to refer to a higher degree of failing (suh as Jaimeweb lists) but without any set boundary. In common law negligence is negligence. It was once descsribed as falling below the level of care that even a careless person would not fail to follow.

 

[Jaimeweb]

Gross Negligence is not generally regarded in the UK as something distinct from ordinary negligence unlike in other countries such a the US where it can be used to trigger higher levels (punitive) of damages. The term can however be used in a loose sense to refer to a higher degree of failing (suh as Jaimeweb lists) but without any set boundary. In common law negligence is negligence. It was once descsribed as falling below the level of care that even a careless person would not fail to follow.

Thanks Graham.
This question might not be something you can answer, so I'll leave it out there for others also...

I guess the worst-case scenario would be if a child was to seriously hurt themselves or death and a claim was made against the Ltd company which didn't/couldn't get any form of liability insurance.

What then happens given that we do have all of the facts and documentation mentioned previously?

Also - how is it proven that the child or adult supervising wasn't following the rules while using the product?
For example, if a child breaks their arm or leg while using the castle, how can that come back to the company, and would it have any grounds? Or worse, they are paralyzed due to a certain 'jump' or fall off the product.

Of course, the risk is small, much smaller than a large commercial 20ft castle we see most commonly.

 

[The Resolver]

You seem to have done all you can be expected to do by way of precuations but you will still always be at risk of litigation (people are free to launch hopelessly weak cases so however strong your defence you wil incur cost and suffer anxiety and loss of time just delaing with it) such that it would be reckless as a Director to not protect the company with full insurance.

 

[Gyumri]

There are about 40 questions and answers on the Argos site with one asking whether the bouncy castle is safe for use by dogs! I suppose it would be safe if used by a Great Dane but not by a cocker spaniel. The point is that provided you give the usual warnings and guidance there not much else you can do.

An Ltd offers limited liability and protects individual directors from being sued so unless fraud is involved the corporate veil will be sufficient protection.

An accident can happen with any item such as inflatable pools and trampolines. It might be worth considering legal expenses insurance rather than product liability. As for public liability I can't see that being applicable unless you're operating a castle yourself although Frank the insurance guy on this forum would know the full picture.

 

[Jaimeweb]

If I’m unable to get product or public insurance though how likely am I to be able to get legal and directors/officers insurance?!
So frustrating when we are doing everything by the book.

 

[Paul Kelly ICHYB]

@Frank the Insurance guy would a change of product description help? Inflatable toys?

Not wanting to come across as evasion @Jaimeweb could offer a range of inflatable products that include bouncy castles.....

 

[Jaimeweb]

@Frank the Insurance guy would a change of product description help? Inflatable toys?

Not wanting to come across as evasion @Jaimeweb could offer a range of inflatable products that include bouncy castles.....

I have thought this myself, and has been mentioned by 1 of the brokers I spoke to. But I was worried of the same thing. But essentially, they are inflatable toys. My problem is that insurers hear "bouncy castles" and instantly categorise us in the same league as huge commercial style.......which they don't seem to have problem getting insurance.

 

[Frank the Insurance guy]

@Frank the Insurance guy would a change of product description help? Inflatable toys?

Not wanting to come across as evasion @Jaimeweb could offer a range of inflatable products that include bouncy castles.....

Key thing here is the reason for the change in description - it appears to be to secure a lower premium &/or cover that otherwise may not be available!

As a business you have a duty to declare any Material Facts to your insurer - failure to do so could mean you are not insured or create issues in the event of a claim.

A material fact is something that could influence the insurer as to whether to accept or decline to provide cover or in calculating the premium, terms and conditions that would apply. If a material fact is not disclosed, that increases insurers risk, or would have resulted in higher premium or decline of cover - you will be in breach and are unlikely to be covered.

It is well known that inflatable bouncy castles could pose a higher risk of injury and therefore likely to be considered a material fact - ie. something you need to notify to insurers.

 

[Jaimeweb]

Key thing here is the reason for the change in description - it appears to be to secure a lower premium &/or cover that otherwise may not be available!

As a business you have a duty to declare any Material Facts to your insurer - failure to do so could mean you are not insured or create issues in the event of a claim.

A material fact is something that could influence the insurer as to whether to accept or decline to provide cover or in calculating the premium, terms and conditions that would apply. If a material fact is not disclosed, that increases insurers risk, or would have resulted in higher premium or decline of cover - you will be in breach and are unlikely to be covered.

It is well known that inflatable bouncy castles could pose a higher risk of injury and therefore likely to be considered a material fact - ie. something you need to notify to insurers.

Thanks Frank.

If we couldn't obtain Product or Public would that rule us out of being able to get Legal Cover and D&O cover?

 

[Frank the Insurance guy]

Thanks Frank.

If we couldn't obtain Product or Public would that rule us out of being able to get Legal Cover and D&O cover?

Legal Expenses insurance cover will be readily available - this type of policy is there to assist with the business' legal costs such as employment issues, or contractual issues with supplies etc.

A legal Expenses policy will not pay legal costs in dealing with a Public or Products Liability claim. However it does usually provide free telephone advice with a legal professional that you can consult on any legal matter (ie. although they cannot act for you and will not pay your legal costs, they will provide you with free telephone advice).

Directors & Officers Insurance may be available. This would protect you individually if you were personally held responsible for a failure in your Director's duties. It may also extend to defend regulatory claims against the company (such as a corporate liability claim). Unfortunately, most insurers will not provide cover unless you have been trading for over a year, have a positive net worth and have not made any losses in the last 3 years.

If you would like a quote for either of these have a chat to the brokers you are working with on the Public/Products Liability quotations (as they already have details of your business) - they should be able to advise and provide a quotation.