Within most business insurance policies, you will have, or have the option of having, liability insurance. Certain liability covers, such as employers, are legally required if you have employees.

The other two liability covers, public and employers, are not legally required, although it is sensible and prudent to have these insurances in place. In addition, it may be that you need to have these covers as part of a contract and have to “prove” the cover is in force.

Commercial liability cover will be at a limit of indemnity. This is an amount any one loss or the total of all claims in any one period (usually a year). If it is the total of all claims, this is described as being “in the aggregate”.

For employers liability insurance, the law of the land states that you must have a limit of indemnity at a minimum limit of £5,000,000 each and every claim. Most insurers will give a limit of £10,000,000.

Public and products limits are at whatever amount you choose. The minimum, nowadays, is £1,000,000 going all the way up to many hundreds of millions for, say, a large airport operator.

But what happens if you get, what you consider to be a completely spurious claim which you do not consider will ever be paid? The first thing is, every single claim against you, should be reported directly to your insurer, or to your broker, if you have one.

You should never, ever assume that a claim is not valid and effectively ignore it. Speak to anyone who works in commercial insurance claims and I can guarantee they can recite half a dozen claims that should never have been paid, but where, and for tens of thousands of pounds.

Your policy will include the costs of fending off, or defending claims, whether or not you think they are valid. Report them immediately otherwise insurers could, quite rightly, say that you have jeopardised their chances of defending the claim properly and you may have to contribute, or at worst have no cover.

Just because you report a claim, it does not mean that your premium will go up. Insurers are realistic enough to accept that if you have done all you can to run the business as smoothly as possible and mitigate, or reduce, any risks then they should not increase the premium.

We have just had one claim, for a lady that was drunk, and admitted it, who fell down the stairs in a hotel and broke both her ankles. Her solicitors, who were really quite aggressive, had almost got to the stage of an £80,000 settlement, but a witness was found.

The witness stated that the guest had been effectively drinking like a fish since the wedding (which was at the hotel) had begun. She had not, tripped over the carpet a stated, but had been helped to bed because she was so drunk and decided to pop downstairs for a few more drinks.

The insurers have renewed this policy at the same as last year, give or take a few percent. The claim, although not paid, cost them thousands to defend. In reality, it really was not the hotels fault and the insurers realised this.