Public liability insurance, one of the most common types of business insurance, covers accidental injury or damage to third parties. But who needs it, and why is it important? We’ll cover these questions and more in this article about public liability insurance. If you want to learn even more, read the in-depth guide to public liability insurance at NimbleFins.
What does public liability insurance mean?
Public liability means that a third party can sue a responsible party (e.g., a business) for negligence and/or damages if they are injured, or their property is damaged. Third parties can include members of the public, customers, visitors, trespassers, sub-contractors, vendors and more.
In the case of business insurance, public liability insurance protects a business against lawsuits brought by third parties who are physically injured or whose property may be damaged and who claim the business is responsible.
Public liability insurance policies will put a company in touch with professional legal advice to manage a claim brought against a company and cover the costs to defend a claim, such as solicitor bills and court fees. In addition, public liability pays any compensation that is required to be paid by the company, should they be found to be at fault.
Why is public liability insurance important?
Public liability insurance is important to help business weather getting sued in an accidental injury or damage claim. Even a small lawsuit can cost thousands of pounds to defend, and even more in compensation claims. Most small businesses would suffer financially and many would face bankruptcy in the event they’re the subject of a public liability claim. Having a public liability insurance policy in place can help a business stay in business if it’s sued.
Even if a business is not at fault, it could still be sued. And a public liability insurance policy can also help to defend against a frivolous claim. In the case of a frivolous lawsuit that has no merit, a business would still need to pay legal expenses to defend against the claim. These legal fees would be covered by the insurance policy.
For example, consider a case where a retail shop floor gets wet on a rainy day as customers walk in out of the rain, shaking their umbrellas on the floor. A customer slips on the wet floor, falling and seriously breaking their hip. They are out of work for months as they recover from surgery and go through rehab. And in the end, they have pain and difficulty walking, which is expected to last for their entire life. The customer could sue the retail shop for not drying the floor or providing ample mats at the entrance. This is a case that could lead to a significant payout to the customer. Without a public liability insurance policy in place, the retail shop would have to pay the legal fees and the payout to the injured party. Still, with public liability insurance, these costs would be covered.
In case of an accident, having a public liability insurance policy can mean the difference between a business being able to stay in business or not. Public liability claims are not cheap to defend or settle. A company without the right liability insurance could face financial ruin without a policy in place to cover them.
Does my business need public liability insurance?
If you or your business has any in-person dealings with clients or other members of the public, you probably need public liability insurance. Examples of businesses that need public liability insurance include, but are not limited to, cafes and restaurants, retail shops, gardeners, builders, trades like electricians and plumbers, dog walkers and more.
If your business never has in-person interactions with clients or third parties, then you might not need public liability insurance. For example, a web designer who only works virtually might not need it. However, if this web designer meets clients in person, then public liability insurance would be a good idea.
What is the difference between professional indemnity and public liability insurance?
Public liability insurance protects against claims of accidental injury or property damage. For example, a client tripping over a power cord and falling, injuring themselves. Or a builder is tripping and accidentally dropping a heavy ladder that breaks a window in a client’s home.
On the other hand, professional indemnity insurance covers claims that a client has suffered a financial loss as a result of poor or negligent professional advice or service. For example, if a solicitor gives advice to a client that is shown to be negligent and ends up costing the client a significant amount of money. Professionals like architects, accountants, consultants, builders, solicitors, designers, and more paid for providing professional advice or a professional service are the types of businesses needing professional indemnity insurance.
And in many cases, a business may need both professional indemnity and public liability insurance to protect against a wider range of risks. Each business needs to assess its own needs.