No matter how carefully you plan and track your motel operations, accidents happen. All it takes is for someone to slip and fall on a misplaced chair in your lobby and you could be looking at a very expensive compensation claim. This is where liability insurance for your motel comes in. It helps to protect you and your business from bearing the financial brunt of accidents. In this article, we take a look at two types of liability insurance for your motel and why such insurance is essential.

Public Liability Insurance

Public liability insurance limits your financial risk when your business is liable for accidents which cause:

  • property damage or loss;
  • personal injury; or
  • economic loss due to negligence

Your motel sign could get blown off in the wind and cause a dent in a customer’s car, or one of your employees may accidentally damage a customer’s item while cleaning their room.

A business like a motel also has a high risk of personal injury simply due to the significant foot traffic coming through your premises. When things go wrong, you would usually be liable for financial costs such as compensation, legal fees and medical expenses. But public liability insurance allows you to shift the financial burden to the insurance company. It saves your business from having to pay out potentially thousands of dollars. If you’re planning on leasing the premises for your motel, your landlord will usually require you have public liability insurance.

Be aware that your insurance provider will assess each incident you claim on a case-by-case basis. You are generally expected to meet the required standard of care when conducting your motel operations and interacting with patrons. You may not be covered for incidents where you didn’t meet this standard or for risks that your business knew or should have known. So before you sign any insurance policy, it’s a good idea to get a lawyer to read over the contract. They can ensure you’re clear on what’s included, what isn’t and what your rights and obligations are in the event of a claim.

Product Liability Insurance

Your business has a legal responsibility under the Australian Consumer Law (ACL) to ensure that any products you provide to a customer are safe for use and comply with applicable mandatory safety standards, even if your business didn’t make the product. But despite best efforts, you can sometimes fail to comply. For example, a foreign object like a screw could find its way into the pasta dish served by your motel restaurant, causing dental damage to a customer. Or perhaps several customers suffer skin reactions from using the body wash provided by your motel.

Product liability insurance protects you in instances where you provide goods to a customer that cause personal injury, death or damage to property. If you’ve purchased faulty products (like body wash) from a manufacturer or retailer, they will generally be responsible. However, you may still find yourself liable if the manufacturer:

  • cannot be identified;
  • no longer exists; or
  • doesn’t have a presence in Australia.

How Much Will it Cost?

The cost of public liability insurance for your motel will depend on various factors, including the:

  • size of your motel (the larger the operation, the higher the risk for something to go wrong);
  • likelihood of making a claim (e.g. providing food or drink on-site increases the risk of personal injury);
  • types of activities performed at your business (e.g. does your motel have a pool or spa?);
  • inclusions you want under your policy; and
  • level of coverage you want (i.e. you’ll have to pay more if you want the insurance company to pay up to $20 million in case of an accident, compared to $5 million).

Personal injury claims can be very expensive for small businesses. You could be looking at paying compensation up to several million dollars, particularly if the injury suffered is serious. Having liability insurance in place can lessen the financial impact of an accident on your business’ cash flow and profitability.

Seek advice from your insurance broker or financial adviser when deciding your level of coverage. Getting a lower level of cover makes your liability insurance cheaper in the short term. However, you may be risking your business’ financial security if someone sustains a serious injury and their claim exceeds your level of cover.

Key Takeaways

Having liability insurance for your motel will give you the peace of mind you need to run your business successfully. If you don’t have this insurance, the right inclusions or the appropriate level of cover, you could be putting your business at financial risk.

If you have questions, get in touch with LegalVision’s business lawyers on 1300 544 755 or fill out the form on this page.

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