- What level of cover will public liability insurance provide?
- Who will be covered by public liability insurance?
- What does having public liability insurance cover mean for you as a business owner?
- What does having public liability insurance cover mean for others who interact with your business?
- Is having public liability insurance part of my legal compliance?
If your work brings you into contact with the public, you will almost certainly need public liability insurance, especially if you are a tradesperson, in construction, or a shopkeeper or other small business. In a worst-case scenario, having adequate public liability cover could be what saves your business from insolvency.
Public liability insurance helps businesses meet the costs of a claim for damages or injury that occur to a third party during the course of regular work. It is taken out by businesses, companies, or tradespeople whose work involves public interaction, even if that contact is only occasional.
Public liability insurance covers claims brought by people that interact with your business, such as customers, clients, and members of the public. A member of the public may claim if they suffer injury or damage because of something you or your business did, or failed to do.
There are many scenarios this could include:
- A builder accidently dropping heavy building materials on to a nearby car.
- A plumber who accidently damages a pipe, causing a leak which results in material damage to a building.
- An electrician who wires a building incorrectly, resulting in a fire that causes damage or injury.
- A customer slipping or tripping in a showroom and injuring themselves as they fall.
- A member of the public struck by falling debris or tools near a building site.
- An accident caused by a tradesman while working in a client’s home that damages the client’s property or person.
Public liability insurance does not cover claims brought against you by your employees.
Claims for personal injury and / or death, and for damage to property, as well as associated legal fees are typically covered by a public liability policy.
These claims range from minor injuries to life-changing conditions, illness, disease, or death, provided they were caused by you or your business.
More specifically, if someone is injured due to your business activities, they may claim for:
- General damages for pain and suffering
- Loss of earnings due to the injury
- Future loss of earnings (if the injuries reduce the person’s ability to work)
- Medical bills, future medical bills, travel costs, necessary medical equipment costs, and other out-of-pocket expenses.
- Legal fees and other reasonable expenses that are the direct result of making the claim.
Most insurance policies cover the cost of repairs or replacement for a wide range of property damage. This could range from minor damage such as a torn suit or ruined shoes to more significant damage like a broken computer, crumbling building, or dented vehicle.
Claims relating to property damage can range from the cost of replacing a new carpet to a complete home renovation, depending on the severity of the incident.
Your policy will usually cover the cost of legal fees that are associated with defending a claim brought against you. This protection against legal costs is a significant benefit of public liability insurance, as legal expenses can themselves be substantial, regardless of the claim's outcome.
The precise details of what your insurance will cover depends on the individual terms of your policy, so it's always important to review your policy documentation carefully.
The level of cover provided depends on your policy. You will normally be offered a choice of cover levels, such as £1 million, £2 million, £5 million or £10 million.
Insurance within this range is typically sufficient for most small businesses. However, the appropriate level of cover for your business will depend on your specific circumstances and risk profile, and it is advisable to discuss this with your insurer or broker.
You and your employees will be covered for anything that you or they do, or fail to do, in the course of your business activities that results in injury or damage to a third party.
It's important to reiterate that public liability insurance will not cover claims made by your employees against you for damage or personal injury – that type of cover is provided by Employers’ Liability Insurance, which is a legal requirement if you employ staff.
Having public liability insurance provides significant benefits for you and your business.
Crucially, it means you have insurance that will protect you financially if a member of the public makes a successful claim against you. Your insurer will pay the money claimed against you, as well as the associated legal fees.
This financial protection safeguards you and your business from having to pay potentially large amounts out-of-pocket, which could otherwise put you out of business, or endanger your personal assets.
Beyond the financial protection, it also gives you peace of mind, knowing that you have a safety net in place should the unexpected happen.
For your clients, partners, and even the general public, having public liability insurance in place indicates that you are serious about your business responsibilities and are operating professionally. It reassures them that you have taken steps to protect them from potential risks associated with your business activities.
In addition, many trade organisations and professional bodies require their members to hold public liability insurance as a condition of membership, serving as an indirect indicator of your professional standards and commitment to best practices.
Similarly, many large companies and public sector organisations will not contract with businesses that do not have adequate public liability insurance cover, making it essential for securing certain types of work.
For most businesses, having public liability insurance is not a direct legal requirement.
However, it is very strongly recommended as a matter of good business practice due to the significant financial protections it offers.
Furthermore, you should always ensure you are rigorously complying with all relevant health and safety regulations, regardless of whether you have a public liability insurance policy in place.
Failure to adhere to health and safety regulations could potentially affect the validity of your insurance cover, as policies typically expect businesses to operate responsibly and within legal guidelines.
It's also important to note that while public liability insurance isn't generally a legal mandate, it can become a contractual requirement. If you have signed a contract (or wish to enter into one) that stipulates you must have public liability insurance, you will be in breach of contract if you do not have adequate cover.
Breaching such a contractual term can have legal and financial consequences, potentially leading to contract termination or even legal action against you.