The purpose of a General Liability policy is to protect you against lawsuits stemming from accidents occurring in the insured premises or during an insured activity, producing injury, death, property damage or loss to third parties. There are also specific liability insurance policies: Automobile Liability, Product Liability, Professional Liability, etc., but those will not be dealt with in this article.

From what I hear and read, in North America liability has gone wild, with people suing each other for trivial mishaps, judges handing out huge awards, and legal eagles (I think legal vultures would be a more apt description!) obtaining huge commissions. In order to reduce their legal costs, insurance companies are also paying liability claims before they enter the legal system.

Things in Costa Rica are quite different.

- The insurance company, INS, never – or almost never – pays a Liability claim before there is a Court ruling on the matter.

- The Legal system in Costa Rica has a considerable backlog – I have heard up to two years – and this tends to discourage trivial claims.

- The opinion of most judges seems to be that everyone should exercise reasonable care and look out for him or herself. I remember reading an article in one of the local scandal rags, some years ago, about a chap who sued the owner of a building because he had tripped and fallen on the sidewalk. The article related that the judged admonished the plaintiff to mind where he was walking, and dismissed the complaint!

- In cases where there is clear negligence on the part of the defendant, the award given to the plaintiff is usually based on redress. In other words, they pay for the amounts that the plaintiff is out-of-pocket due to the accident or mishap. Awards for pain and suffering and punitive damage, if any, are usually insignificant. No fortunes to be made for burning oneself on a cup of hot coffee in a fast-food restaurant, not in Costa Rica!

Anyone can buy a General Liability policy: homeowners, tour operators, hotels, restaurants, shops, food manufacturers, etc. But, in my opinion, in this country Liability insurance is not a great priority for a normal householder, for the reasons outlined above. And businesses engaging in activities where there is Liability risk buy get much, much less coverage than a similar business in North America would need.

The General Liability policy is based on a certain activity or premises, and if there is a risk of an accident or loss to a guest, consumer or client, a Liability policy may be advisable. I want to underline that in Costa Rica Liability insurance is based on a certain premises or activity, because in some foreign countries an individual can buy insurance to cover any Liability event in whatever activity he or she engages. Within the policy, two coverages are available:

Coverage A - Injury, loss of life and limb.

Coverage B - Damage or loss of property.

You can have separate limits for coverage A and Coverage B, but the usual is a Combined Limit, where INS will pay up to the insured limit, per accident, regardless of the breakdown of the award.

In order to determine house much insurance to get, visualise a worst-case scenario of what could happen in an accident and estimate how much it would cost to put things right: that is the recommended limit.

The premium for General Liability is a percentage of the insured amount, usually around 1% per year. INS fixes the exact rate on a case basis, per the perceived risk as described on the policy application, which has to be filled out by the Agent when visiting the premises or location where the insured activity is being developed. It is usual, also, for INS to send an inspector, before establishing the rate, to interview the applicant and corroborate the information on the application.

Our purpose is to give the reader a better understanding of insurance in Costa Rica. The opinions and viewpoints expressed are those of the writer, and do not necessarily represent the official position of the National Insurance Institute (INS).