In brief. A company does not have "one" civil liability but several, depending on what it answers for: its activity and premises, its employees, its products, its technical advice, the management of its directors, or the environment. Each is a different risk and is covered by a different liability line. A well-built programme coordinates them so that no gaps or overlaps remain. The scope of each cover is governed by the terms of each policy.
What types of civil liability can a company have?
Civil liability arises from a basic legal obligation: to repair the damage caused to a third party. The Spanish Civil Code frames it in two ways. Non-contractual (tort) liability (articles 1902 and 1903) requires anyone who, by act or omission, causes damage to another to repair it, and extends that obligation to damage caused by the persons for whom one must answer —employees included—. Contractual liability (article 1101) answers for the loss arising from the breach of an agreed obligation.
From that common trunk branch out the different types of business liability. They are not marketing labels: each answers for a different source of damage and is therefore insured separately. Confusing them —or assuming that "the liability policy" covers everything— is the most frequent cause of the gaps that appear after a claim.
This article sets out that map and links, for each line, to the detailed analysis. The aim is not to sell a cover, but for you to understand how many fronts your company answers for before deciding how to protect them.
The main types of corporate liability
These are the lines that make up the liability risk map of an organisation. In a large account they rarely act in isolation: they usually coexist within a single programme.
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General or public liability. This is the base of the programme. It covers damage caused to third parties by carrying out the activity and by the company's premises: a client injured on your premises, damage to another party's property during an operation, loss arising from the ordinary running of the business. The other lines are built around this core cover.
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Employers' liability. It covers claims by the company's own employees —or their dependants— for damage suffered in a workplace accident, beyond Social Security benefits. It answers for the company's liability as an employer when the worker seeks additional compensation.
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Product liability. It answers for damage caused to third parties by defective products placed on the market: a manufacturing, design or information defect that causes loss to whoever uses it. It is critical for manufacturers, importers and distributors. We develop it in product liability.
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Professional indemnity (E&O). It covers the financial loss a third party suffers from errors or omissions in the provision of technical or intellectual services: a miscalculation, defective advice, an omission in a project. Unlike general liability, it does not answer for physical damage, but for the financial loss arising from professional practice. We analyse it in professional indemnity insurance for engineering firms and consultancies.
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D&O (directors' and officers' liability). It protects the personal assets of decision-making officers against claims for their management: corporate decisions, fiduciary duties, obligations to shareholders, creditors or the authorities. It does not cover the company as such, but the people who run it. We detail it in D&O insurance.
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Environmental liability. It answers for damage to the environment and the remediation costs of pollution or deterioration of natural resources. It is especially relevant in industry and activities with environmental exposure, where a specific liability regime also applies. We cover it in environmental liability insurance.
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Decennial liability (construction). It covers the structural damage that compromises the stability of a building during the ten years following its handover. It is a liability specific to the construction sector, with its own legal regime. We explain it in decennial liability.
What is the difference between public, employers', product and professional liability?
This is the distinction that causes most confusion, because all four are marketed under the umbrella of "liability insurance". Yet they answer for damage of very different natures:
| Type of liability | What it answers for | Example |
|---|---|---|
| Public liability | Damage to third parties from the activity and premises. | A visitor slips in the warehouse and is injured. |
| Employers' liability | Employee claims for workplace accidents, beyond Social Security. | A worker seeks additional compensation after an accident on the line. |
| Product liability | Damage caused by defective products already on the market. | A component made with a defect causes harm to the end user. |
| Professional indemnity (E&O) | Financial loss from errors or omissions in technical services. | A calculation error in a project generates a cost overrun for the client. |
The practical rule is simple: public liability looks outward (the third party who suffers the damage in the setting of the activity), employers' liability looks inward (the employee), product liability follows the product once marketed, and professional indemnity answers for the advice or service provided. The specific scope of each cover, its limits and its exclusions are governed by the terms of each policy.
Which liability insurance does each company need according to its activity?
There is no universal combination: the liability map depends on the activity, the corporate structure and the real exposure of each organisation. Broadly:
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Industry and manufacturing. They usually combine public liability (base), employers' liability (plant workforce), product liability (goods placed on the market) and, depending on the process, environmental liability. This is the profile with the most fronts open at once.
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Technical and intellectual services (engineering firms, consultancies, architecture practices). The core is professional indemnity (E&O), complemented by public liability for office activity and, where they provide site-management services, by construction-specific cover.
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Construction and development. In addition to public and employers' liability, decennial liability comes into play, with its specific regime, along with the guarantees tied to the works.
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Company with a board of directors. Regardless of sector, where there are directors and officers with decision-making power it is advisable to consider a D&O policy, which general liability does not cover.
Here it is important to distinguish the compulsory from the advisable. As a general rule, liability insurance is not compulsory for every company. But certain activities and sectors have compulsory liability cover under specific legislation: construction (the Building Regulation Act), activities with significant environmental risk (Law 26/2007) or certain regulated professions, among others. The remaining covers respond to the real exposure of the business and must be sized case by case. It is advisable to verify whether cover is compulsory by activity before taking anything for granted.
The key is not to accumulate policies, but to coordinate them: to prevent two covers from overlapping —and you paying twice for the same thing— and, above all, to prevent a gap between them through which an uncovered claim can slip.
The role of an independent broker
That coordination work is precisely that of a broker. Designing a coherent liability programme requires looking at all the lines at once —public, employers', product, professional, D&O, environmental— and verifying that the limits, deductibles and exclusions of each policy fit together without leaving grey areas.
As an independent broker, New Brokers works under the client's mandate and with access to the whole market —including Lloyd's—, which makes it possible to compare the risk appetite of several companies for each line and to build a tailored programme, not a set of loose policies. You will find the detail of the lines we coordinate in our cover areas for large accounts.
Frequently asked questions
What types of civil liability can a company have? Mainly general or public liability, employers' liability, product liability, professional indemnity (E&O), D&O (directors' and officers' liability) and environmental liability; in construction, decennial liability as well. Each answers for a different kind of damage.
What is the difference between public liability and employers' liability? Public liability covers damage to third parties arising from the activity; employers' liability covers claims by the company's own employees for workplace accidents, beyond Social Security benefits.
Is liability insurance compulsory for a company? As a general rule no, but certain activities and sectors have compulsory liability cover under specific legislation (e.g. construction or environmental risk). It should be verified by activity.
Does general liability cover the company's directors? No. The personal liability of directors and officers for their management is covered by a D&O policy, separate from general liability. They are different risks.
Sources and regulations
- Spain's Royal Decree of 24 July 1889, Civil Code, articles 1101 (contractual liability), 1902 and 1903 (non-contractual liability and liability for dependants).
- Spain's Law 50/1980 of 8 October on Insurance Contracts — framework for liability insurance.
- Spain's Law 38/1999 of 5 November on Building Regulation (LOE) — liabilities and compulsory guarantees in construction.
- Spain's Law 26/2007 of 23 October on Environmental Liability — regime of liability for environmental damage.
- Directorate-General for Insurance and Pension Funds (DGSFP) — supervision of insurers and intermediaries.
New Brokers is an independent insurance broker registered with the DGSFP under code J0140. This content is for guidance only and does not constitute binding advice; cover, guarantees and terms are governed by each policy and company. We work under the client's mandate, with access to the whole market —including Lloyd's— and defence in the event of a claim.
Do you know how many fronts your company answers for? Request a review of your liability programme. We coordinate all your covers and compare the market for you.