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Public liability risk of
business owners 

(Article published in the Mar 1, 2006 issue of Manila Standard Today)

In contrast with the hollow ring of still President Gloria Macapagal-Arroyo’s “I am sorry” in the wake of the “Hello Garci” exposé of  the call to a Comelec official whom neither caller nor callee (not “coolie”) would identify was the almost hallow tone of the statement last month of Eugenio Lopez III, ABS-CBN chairman and CEO.

Reiterating what had previously been articulated for him by his subordinates, the Lopez patriarch in reaction to the Marius Corpus assessment of the Ultra Stampede, reportedly said, one full month prior to Ash Wednesday:

“I am responsible and I will hold myself accountable should our justice system so determine in the future.  There will be no whitewash.  We will continue to work with the government and all its agencies.”

I do not know the man whom some people call by his nickname “Gabby” from Adam nor am I a fan of the Lopez Group of Companies. In fact, I am extremely annoyed by the periodic calls and visits of the Zpdee’s collection and disconnection teams despite a standing auto-debit authorization from a valid credit card, a system of payment they themselves encouraged.  And I tell my dog to chase the Meralco bill collector.

But, despite his business organization’s failings, Mr. Lopez’s statement, in my view, crystallizes the standard of personal risk that anyone who deals with the public, in business or in politics, ought to accept. Male or female, good leaders, pardon my French, put their balls on the line.

But what if the business owner is not a Lopez, or, being one, of the kind who is not as affluent?  Must keeping faith with one’s publics always mean putting in economic jeopardy one’s entire estate?  Professional risk managers tell us, “not so”.  The pain of being made liable to one’s customers, when it comes, may be mitigated by business owners, whose business with the public constitute the core asset in their personal estates, by taking out public liability insurance.

“Public liability” is, in insurance industry lexicon, an umbrella term that generally refers to the risk of being made to pay legal claims of third parties, i.e. persons who ordinarily are not related to the business under a contract.    For example, a personal injury claim by a member of the audience at the front row who is hit by the mike of a performer gyrating in Elvis Presley fashion.  Or a complaint by La Sallite (with a genuine high school diploma) in the box section struck unconscious by the ball thrown in the air by a waterboy of the victorious Blue Eagle basketball team.  Or, seriously, a case brought against the shopping mall owner by a visitor who slips on the floor due to melted ice cream spilled by a bratty kid and left unattended by the contract cleaners.  “Public liability insurance” is a policy providing coverage against that risk.

I am no insurance man, like the ageless Reynaldo A. De Dios, publisher-editor of Insurance Philippines, who ought to be able to give the best advice of what you coverage you need, but, in my view, a business owner wanting to protect his estate from legal tsunami, should seriously consider three types of coverage: first, against premises liability; second, against product and services liability; and third, for the magnates and taipans, directors and officers liability.  The risks may be covered by his or her standard general liability policy; but then again, they just might not be. 

Exposure to legal liability for damages in general from several provisions of the Civil Code, but, the most bothersome is Article 2198 which says that “the principles of the general law on damages are hereby adopted insofar as they are not inconsistent with this Code”.  This incorporation by reference raises the specter of an ultra-litigious environment (where so-called plaintiff-lawyers roam for victim-preys) that we find in the United States coming to our shores, if it has not come yet together with Hollywood on television.

Premises liability is the most common exposure because business owners are expected to have places of business.  Even notaries public who ply their trade in the vicinity of city hall are mandated by the Supreme Court to have a fixed place of business.  Although the possibility of personal injury in a notary’s office is quite remote (unless you refuse to pay the fees and the clerk of the notary knocks you on the head with the notarial seal), theater owners, shopping centers, restaurants, are particularly vulnerable.  I understand, though, that motel owners, for some reason unknown to me, are not afraid of premises liability and pay no insurance premium, other than mayor’s fees. 

Product and services liability insurance is premised on the obligation to safeguard customers from the harm they may suffer from the use of a product or service. This is a particularly complicated area of litigation because the claimants can choose from a wide range of choses in action (in non-lawyer language, justification for suing) from breach of warranty, express or implied, real or imagined, to negligence, actual, presumed, or, almost conclusive.  Food and drug manufacturers and providers, professionals (a label given broad scope in US tort litigation that includes pool hall operators, truck and taxi drivers, but not, I believe, taxi dancers), and, particularly, transportation companies ought to be interested in this coverage.

The active local market for directors and officers liability insurance, I was told, is presently limited to multi-national corporations doing business in the Philippines.  But, as Mr. Good Corporate Governance, Jess Estanislao, continues his crusade, and as the Securities and Exchange Commission relentlessly push the campaign for the widespread adherence of companies, including those not subject to the Securities Regulations Code, to the principles in the Code of Corporate Governance, this type of coverage will soon be in demand.

Essentially, directors and officers liability insurance deals with exposure arising from errors and omissions, not negligent acts, that a director or officer commits in the scope of his functions and responsibilities.  For instance, failure to look into the off-balance sheet liabilities of an enterprise prior to a merger or acquisition might be the propounded reason for a decline in shareholders’ value.  Directors and officers liability insurance is not for claims against negligence or deliberate acts; it is for the resulting damage from oversights, errors, mistakes and misinterpretations. 

I must confess, however, that I do not know whether a “lapse in judgment” of an impeachable  public official is a risk covered by directors and officers liability insurance.  Party loyalty, acquired, developed and maintained by means not known to many of us, just might be the right insurance for that.  But, the effectivity of that kind of coverage, I was told by Fr. Joaquin Bernas, S.J., in my sleep, is only for a year.

Finally, a fourth risk reared its ugly head just as I was writing this item: the risk of censorship and/or closure faced by media establishments who do not comply with the yet unpublished standards that Daily Tribune, in the mind, if any, of those who ordered the raid on the paper last Saturday failed to comply with. 

         I am, of course, not vulnerable to the censorship risk because I do not think anybody reads me.  How can they stop the reading of what is not read?  But, just in case there is one wayward reader out there, I give notice that this and my next few items, for as long as the state of emergency exists in the mind of still President Gloria Macapagal Arroyo, will be sent by e-mail to whomever cares to receive it at the same time that it is sent to my editor for publication the following day.  If you wish to be a recipient, please send your e-mail address to or and I trust my editor will forward it to me.