Liability for compensation

05 February 2004 by
Liability for compensation

The problem

You are the manager of a busy London hotel. A break-in yesterday has resulted in a number of thefts from ground-floor rooms, and guests are demanding compensation. Under the Hotel Proprietors Act your liability is limited to compensation of up to £100 per room. Unfortunately, the new London Local Authorities Act, which is likely to come into force in mid-2004, will greatly increase this liability. You will be unable to insure against these losses and will be forced to meet the claims out of your own resources.

Under the Hotel Proprietors Act 1956 (HPA) there is a strict (no negligence required) obligation on the part of all UK hotels to compensate guests up to £50 per article and £100 in total for losses as a result of negligence by the hotel. However, under the new London Local Authorities Bill, these costs will increase to up to £750 per item and £1,500 in total for hotels in London. It is possible that the greater costs will be introduced across the rest of the country soon.

Traditionally, HPA claims are excluded from any UK liability insurance cover, as they are considered a management issue for the hotel rather than an insurance matter.

Expert advice

The key to keeping uninsured costs under control is prevention and careful management of compensation claims when they arise.

Preventive risk-control measures include regular checking of the locks on doors and windows and the employment of security personnel. In particular, introduce strict rules on the issuing and use of master keys or consider changing to swipe cards. When in use, closed-circuit television (CCTV) enables hotel staff to oversee activities in the main areas and corridors of the hotel and also to review events when a theft has occurred.

Careful management of claims for loss or damage can mitigate the total loss. Ask guests to report their loss in writing and to provide as much evidence to support the claim as possible. It is surprising how many claims for valuable items can turn out to be replaceable at a far lower cost if you politely but firmly request original receipts. An insurance broker or total incident management provider will be able to provide you with appropriate systems and check lists.

Check list

  • Consider installing CCTV.
  • Ensure that all locks on doors are regularly checked and review procedures relating to master keys. Check that swipe-card read-outs are working properly.
  • Where keys are still used, ensure guests hand them in when they leave.
  • Ensure that every claim is recorded and reported to the police. Obtain full inventory of losses and insist on seeing receipts/invoices.
  • Review staff training to stop unauthorised guests entering rooms that are open for cleaning, and look again at procedures for logging and storing items left behind by guests.
  • Make sure the room directory reminds guests that the hotel offers safe facilities for valuables and, unless deposited, the hotel cannot accept responsibility.
  • Remember to display a copy of the new act once it has come into force.

BEWARE!

The new regulations relate to every claim, so a series of thefts across 10 rooms could expose your hotel to 10 uninsured losses of up to £1,500 each, or £15,000 in total.

Contacts

John Davies at Alexander Forbes Corporate Risk Solutions, Alexander Forbes House, 6 Bevis Marks, London EC3A 7AF
Tel: 020 7933 0000

British Hospitality Association, Tel: 020 7404 7744, Website: www.bha-online.org.uk

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