The Glorietta incident (an explosion in a restaurant at the Ayala shopping mall that killed several customers) has spawned a lively discussion, even among insurance professionals, over the kind of liability insurance policy that must have been in force at the time of the incident.

The most well-known third party liability policy is the Compulsory Third Party Liability (CTPL) that the law requires of motor vehicle owners. But, there is a raft of lesser-known policies that covers almost any risk known to man. The latest insures environmental risks.

The Americans being a highly litigious race, third party liability insurance is one of the largest lines in the U.S., and for that matter, Canada. But, here, third party liability outside of the CTPL is a minor line.

For commercial establishments, the most common insurance policy here is the Comprehensive General Liability (CGL). Basically, the policy indemnifies the insured of all sums he may be held legally liable to pay for (a) bodily injury to third parties, and/or (b) damage to property owned by third parties.

Please notice the term “legally liable.” In the Philippines, one can be held legally liable if he is grossly negligent. For example, if a customer trips over a loose board in the staircase and, as a result, breaks a leg, the restaurant owner is clearly liable. But, if the restaurant owner can prove that he had done everything expected of a good father to prevent the accident, he is free of any liability.

Then there is the contributing negligence of the third party. For instance, if the lady customer tripped because of a loose heel in her shoe, the liability of the restaurant owner would be less harsh.

In the U.S. and Canada, the rule is far different. There is no need to prove negligence. All you have to prove is that somebody hurt you.  For instance, if a customer at a bar gets drunk and meets an accident while driving home, the bar owner is liable for allowing the customer to drive while soused.

The CGL also pays for the cost of a suit against the insured. It is no small comfort to the insured that he has an insurance company to back him up in case of suit from a customer. If fact, some claimants would not push through with their complaints if they found out that they have to contend with an insurance company.

It is common for a lease contract to contain a “hold harmless clause.” The building owner and the tenant agree that the former is not liable – held harmless – for any accident that may happen in the rented premises. Every lease contract I have signed as a tenant in Makati over the last forty years has his clause.

It would be interesting to find out the wordings of the “hold harmless clause” in the contract between the restaurant and the Ayala owners.

If the restaurant does not carry a CGL policy, or even if it does, but the policy limits are not high enough, Ayala would be held secondarily liable. Ayala’s policy will then respond if properly written, as I assume it is.

I am assuming, or course, that the restaurant was grossly negligent and, is, therefore, legally liable.

For a restaurant, the CGL policy should also insure against “products liability” – in effect, against food poisoning.

I hear some city councils are toying with the idea of requiring commercial establishments in shopping malls to put up CGL policies as a prerequisite to a mayor’s permit.  Our well-meaning politicians should go slowly on this idea. This idea usually leads to high premiums from insurance companies duly “accredited” by the city council. Graft and corruption will then reek to high heaven.



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