What professional liability insurance is compulsory in Luxembourg?
Professional or operational liability, business interruption insurance, etc... Do you find these different types of professional cover a little mysterious? Overview of compulsory insurance for companies and policies that could prove invaluable for keeping your activity going.
Compulsory insurance in Luxembourg: theory
Unlike our European neighbours, the Grand Duchy is not very restrictive in terms of professional insurance. The law only provides for two obligations:
- Contribute to the Joint Social Security Centre (CCSS) to cover sickness, accident at work and retirement pension for a company’s employees
- Insure company vehicles, at least third party.
Beyond this common base, certain professions are subject to other obligations, while extended protection remains essential for others.
Professional liability insurance: when your customers move against you
This insurance covers you in the event of damage caused to your customers within the contractual framework of the company’s services, when you have committed a fault or an oversight.
For example, you are a dentist and one of your patients considers that there was negligence in your follow-up which caused him complications.
Or you are a garage owner and your customer claims that his vehicle still doesn’t work properly despite your intervention.
Or you are a pastry chef and your customer accuses you of having suffered from food poisoning caused by the cake you created.
When your customers initiate proceedings which relate to your services, this may invoke your professional liability insurance. This insurance covers losses suffered by your customer due to the improper performance of the contract. You will therefore be reimbursed for the legal costs and damages claimed.
Professional liability insurance is compulsory in Luxembourg only for architectural firms and consulting engineers, hotels, travel agencies, law firms and insurance brokers.
If you are not the head of a company in a sector listed above, we invite you to find out about the risks you run.
Business liability insurance: when the accident affects a third party
This insurance policy covers your business in the event of losses caused to a third party with whom you are not contractually bound.
For example, you are a shopkeeper and a customer is injured while sliding on a wet floor inside your shop. The customer decides to invoke your liability for reimbursement of medical costs. As the accusation does not relate to your business performance, this is therefore covered by business liability insurance.
Similarly, imagine that you are running a building firm. On a building site, one of your employees drops a tool which strikes a passer-by three metres below. Again, it’s business liability that protects you.
Business liability is not imposed by law in Luxembourg. However, without being compulsory, it would seem to be indispensable once you are in contact with the public.
Business interruption insurance: your production site can no longer function
Fire, storm, IT problem... what would happen if your business had to stop production?
Imagine that your building is destroyed. During reconstruction, you cease activity. Money isn’t coming in, but you have to keep paying your employees’ wages and other fixed costs. The risk of going bankrupt is high if you don’t have at least one year’s worth of cash behind you.
Business interruption insurance is not compulsory but it makes it possible to cope with this risk by compensating for the loss of gross margin following a reduction in your turnover. Read our article on business interruption insurance to find out more.
