Is civil liability insurance compulsory for professionals in Luxembourg?
Are you self-employed or a professional in Luxembourg? In the course of your business, you may inflict damage on third parties, such as suppliers, customers or business partners.
Depending on the cause, these people could seek compensation from you, jeopardising the future of your business and your reputation. This is where Civil Liability comes into play. What does it cover? Is it compulsory? Here's a detailed analysis of this insurance, which comes in handy in the event of a problem.
What is civil liability insurance?
Civil liability insurance protects professionals against the financial consequences of damage inflicted on third parties in the course of their professional activity.
This damage may include:
- Bodily injury (a customer is injured on your premises);
- Material damage (in the course of a service, you damage an item entrusted to you);
- Immaterial damage (your advice results in a loss of sales for the customer).
In the event of a dispute, this insurance covers defence costs and any compensation owed.
What does Luxembourg law say about it?
In Luxembourg, the obligation to take out professional liability insurance varies according to the sector of activity. Unlike some neighbouring countries, Luxembourg doesn’t impose a general obligation on all professionals.
Business liability, post-delivery liability, professional liability: what's the difference?
Business liability, when the damage occurs in the course of business operations.
In practice: Say you’re a shopkeeper and a customer is injured after slipping on a wet floor inside your shop. The customer decides to invoke your liability for reimbursement of medical costs. As the accusation doesn’t relate to your business performance, this is therefore covered by business liability insurance.
Post-delivery liability, when a loss results from goods/services sold and delivered by the company.
In practice: You're a heating engineer who makes a connection error that causes a company's boiler to explode after installation. This results in personal injury (people in the company were injured), property damage (damage to buildings) and consequential non-material damage (business interruption for the duration of the work). This damage is covered by the post-delivery liability insurance policy you’ve taken out.
Professional liability (mandatory for certain activities), when the loss results from a breach of contract.
In practice: Let’s say you’re a dentist and a patient finds that they suffered complications as a result of your negligence.
Which professions are required to take out professional liability insurance?
For some professions, liability insurance is not only recommended, it's mandatory.
This is the case for regulated professions such as:
- Architects and consulting engineers,
- Chartered accountants,
- Travel agencies,
- Notaries,
- Certain medical professions.
What about self-employed professionals and SMEs?
For the self-employed, professionals and SMEs not belonging to the above-mentioned sectors, professional liability insurance isn’t compulsory under Luxembourg law, but it is strongly recommended.
For example, craftsmen, shopkeepers or consultants may not be obliged to take out insurance, but in the event of a dispute, they could face considerable costs that could jeopardise their activity and the survival of their business.
Why take out Civil Liability insurance?
Even in the absence of legal obligation, there are several reasons to take out professional liability insurance:
- Protection against third-party claims, which can involve substantial sums.
- A frequent contractual demand from customers and partners.
- Enhanced professional credibility: managing an incident effectively preserves your company's image.
- You can run your business with peace of mind.
How to choose the right liability coverage?
As a professional, here are a few points to bear in mind when choosing the right policy to protect your liability:
- Evaluate the specific risks associated with your business.
- Check industry and contractual requirements
- Adapt coverage limits to business volume
- Pay attention to exclusions and deductibles
- Compare offers from insurers on the Luxembourg market
Although professional liability insurance is not compulsory in Luxembourg, it is strongly recommended for all professionals. Given the risks inherent in any professional activity, this protection is an essential security measure in a company's risk management strategy.
We recommend that you consult a specialised insurance advisor to determine the legal obligations applicable to your sector of activity, and to identify the most appropriate coverage.
