What does public liability insurance cover mean?

In a worst-case scenario, having adequate public liability cover could save your business from insolvency. Therefore, it's important to understand what it is and how it works.

In this video, part of our Public Liability FAQ series, we answer the question ‘What does public liability insurance cover mean?’.

What is public liability insurance?

Public liability insurance is taken out by businesses, companies, or tradespeople whose work brings them into contact with the public.

There are many ways this could happen. A few examples include:

• a building site situated on or next to a public road
• working in a shop or retail outlet
• visiting the home of a client or customer during a callout

It’s important to note that you don’t need to come into direct contact with the public much for a policy to be worthwhile. Occasional contact is enough.

The reason you get cover is to protect you and your business if a member of the public makes a claim against you for injuries or damage.

What sort of claim can someone make against your business?

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 ways this could happen:

• Someone could slip or trip in your store and injure themselves as they fall.
• They may be struck by falling debris or tools near a building site.
• While working in someone’s home, an accident could cause damage to their property or person.

These sorts of claims, particularly if a serious injury has been sustained, can be complex.

If someone breaks their leg, they may want to claim for lost earnings while they are off work, any medical fees they’ve incurred, and even for medical equipment.

If they’ve sustained lifechanging injuries, they may claim long-term loss of earnings, the cost of adjustments to their home, and the cost of home care.

If it’s their home that has been damaged, you could be looking at a claim for anything: from a new carpet to a complete home renovation.

On top of all that are the legal costs of dealing with a claim, which in themselves can be substantial.

What does having public liability insurance cover mean for you?

It means you have insurance that will protect you if a member of the public makes a successful claim as described above.

An insurer will pay the money claimed against you, as well as the legal fees. That protects you and your business from having to pay potentially large amounts that could put you out of business, or endanger ownership of your home. It also gives you peace of mind.

What does having public liability insurance cover mean for others?

It indicates you are serious about your responsibilities and business, and are properly set up.

Many trade organisations require you to have public liability insurance to be a member, so it is also an indirect indication of your professional standards.

Many large companies and public sector organisations won’t contract with businesses that don’t have public liability insurance.

Does having public liability insurance mean you’re compliant?

There is no legal requirement to have public liability insurance cover other than the terms of any contract you have or wish to enter in to.

If you have signed a contract that stipulates you must have public liability insurance, you will be in breach of contract if you don’t have cover.

This will have potential legal consequences. The other party may bring the contract to an end, or even bring a claim against you for breach of contract.