Public liability is one of the most widely held forms of business insurance, and for good reason. It protects your business if your activities cause injury to another person or damage to their property. A single incident, even a genuine accident, can lead to a claim large enough to threaten a business that is not covered.
It is mentioned often but rarely explained on its own. Here is what public liability cover actually does and why it matters for almost every business.
What public liability covers
Public liability insurance covers your legal liability to third parties, meaning people who are not your employees, for personal injury or property damage connected to your business. If someone makes a claim against you, the policy can cover:
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Compensation or damages awarded to the injured party.
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Legal defence costs, which can be substantial even if the claim is ultimately unsuccessful.
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Costs associated with investigating and settling the claim.
Some everyday examples
Public liability claims arise from ordinary situations more often than dramatic ones. A customer slips on a wet floor in your premises and is injured. A member of the public trips over equipment your business left on a footpath. A contractor accidentally damages a client’s property while carrying out work. A product display falls and injures a passer by.
In each case, the business could be held legally responsible, and the cost of defending and settling the claim could run well into six figures.
Who needs it
Almost any business that interacts with the public, visits client sites, or has people come to its premises has public liability exposure. Retailers, tradespeople, hospitality venues, professional offices, market stallholders and event organisers are all common examples.
It is also frequently a contractual requirement. Many clients, landlords, councils and event venues will not engage you or let you operate without evidence of public liability cover, often at a specified limit.
How much cover is enough
Public liability is usually arranged at a set limit, either ten million dollars or twenty million dollars are usual for leases and other contracts. The right level depends on your activities, the environment you work in, and what your clients or contracts require.
Larger organisations and government bodies increasingly require higher limits from their suppliers and contractors. If you are bidding for bigger contracts, check the insurance requirements early, so that you can speak to your insurance adviser about the potential cost of increased cover or sum insured.
Public liability is not the same as other covers
It is easy to confuse public liability with other policies. It is not product liability, which covers harm caused by products you make or sell, though the two are often packaged together. It is not professional indemnity, which covers financial loss arising from your advice or services. And it does not cover injuries to your own employees, which is the role of workers compensation.
Understanding where one cover ends and another begins helps you avoid gaps.
Public liability cover is a foundation of sound business protection. Accidents happen even in well run businesses, and the cost of a claim can be far greater than the cost of cover. Speak with your insurance adviser to check that you hold public liability cover at a limit that suits your activities and meets your contractual requirements. They can provide advice and options to meet your needs and budget.
General advice warning: The information provided is general advice only. You should consider whether it is appropriate for your objectives, financial situation and needs before acting on it. You should obtain and consider the relevant Product Disclosure Statement before making any decision to purchase a financial product.