Public Liability Insurance

Public liability Insurance protects you and your business in case somebody sues you, claiming that they were injured or suffered some loss as a result of your business activity.

It covers you in the event that you are found to be liable for compensatory or punitive damages, and for any legal fees associated with the case.

First, let’s clear up what may be a point of confusion.

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Depending on where you are located, the same kind of insurance can have different names, but basically, it is meant to cover you from the same risks.

So if you are in most states in the USA, your insurance agent or broker may be talking to you about General Liability insurance (GLI).

It’s also sometimes called business liability insurance or commercial general liability insurance.

Public Liability Insurance

In most of the rest of the English-speaking world, in Canada, and in some states in the US, it’s called Public Liability insurance.

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Essentially, all of these mean the same kind of insurance. In the rest of this article, we’ll refer to it as Public Liability Insurance.

What does Public Liability Insurance protect you from?

Public liability insurance helps protect you and your business from claims in case there’s some accidental bodily injury or property damage to someone, and they sue you for compensation.

For example – if someone falls while visiting your business premises or a customer is hurt by a product your business sells, you can be held responsible.

There are two types of legal damages people may sue you for that are typically covered by a public liability policy:

  • Compensatory damages: financial losses they claim to have suffered as a result of your business and future losses they claim in a lawsuit they might suffer resulting from an injury.
  • General damages: indirect losses suffered by the injured party, such as “pain and suffering” or “mental anguish.”
  • The policy also pays for legal costs associated with defense of a lawsuit related to the claim.

Why do you need public liability insurance cover?

Our advice is for you to draw up your public liability risk profile. This will help you to identify the degree of exposure of your business and of yourself.

Businesses that are considered high risk typically include:

  • business where you or your staff are in contact with members of the public
  • work involving potentially hazardous equipment or machinery
  • working with potentially dangerous materials
  • working in dangerous locations

You should consider public liability insurance if your business works with the public in any way.

When people are coming onto your premises, such as shops, restaurants, studios, gyms etc.

Also if your activity means you are working in public places or private homes, such as plumbers, electricians and building contractors, certainly you should also consider a public liability policy.

Basically, the need for public liability is quite straightforward.

If there is any chance a member of the public could be injured or have their property damaged and could then claim that this happened as a result of your work, then you should have public liability insurance.

Self-employed workers and small business owners are most in need of public liability insurance.

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This should be the very first form of business insurance on your list.

You  need public liability insurance if:

  • you own business and operate from premises that members of the public, customers or clients visit.
  • your business organizes events or activities at external venues, that are attended by members of the public.
  • you run a business from your home and people visit your home for business purposes.
  • you offer services that require you to work on external sites. You will need public liability insurance along with specialized cover if you are working, for example, as a general contractor, handyman, water taxi, roof repairer, car wash, solar panel installer or fencing contractor.
  • you offer casual services, such as a dog walker or pet groomer

Public liability insurance covers anyone, apart from employees, with whom you interact as part of your business operations,  such as:

  • people visiting your business
  • customers
  • clients
  • people taking part in or watching events or activities you have organized

Public liability insurance helps protect you and your business from claims in case there’s some accidental bodily injury or property damage to some third party.

‘Third party’ means some person who is not directly associated with you (such as a family member) or your business (such as an employee).

In the case of property, it means something that does not belong to you or is legally under your control.

So, if you are working on site and a customer or a visitor accidentally trips and falls over some of your toolkits, public liability insurance covers you for any claims for injury or associated costs like medical care.

These sorts of accidents can happen during normal business operations.

Without coverage, your company, and ultimately you, are responsible for the damages and may have to pay out of your own pocket.

What Does Public Liability Insurance Cover?

Public liability insurance coverage includes the following:

  • Bodily injury: it covers expenses if someone is injured or dies. A typical example would be if someone trips and falls when stepping over a broken tile inside your shop. They can sue for medical expenses, and even for long-term effects if serious injury was caused.
  • Property damage: it covers damage to a third party’s property. Let’s say you are a carpenter working inside a customer’s home. In an accident, your high-speed saw blade splits and flies off, chopping a hole in the marble wall. Your policy would help cover the cost of repairing.
  • Legal expenses: covers the cost of an attorney who represents your business in a lawsuit brought by anyone claiming some form of accidental damage or injury in the course of your work.

Make sure that your public liability policy offers these fundamental covers:

Damage to property

The most common claims are made for damage to property.

This can be damage caused by you, your employees or anyone working under your supervision. For example, a workman knocking over a table which breaks an expensive glass vase.

Trips, slips and falls

People calling around on a business visit to your premises could slip, trip or fall resulting in an injury.

For example, your floor has just been washed and is slippery. If a customer visits your shop and slips and breaks a leg. If they make a claim, the court may well find you were liable and you’ll find yourself subject to an expensive settlement.

Disrepair

You have what is known as ‘a duty of care’ so that your premises are kept as a safe environment for your workers and the general public

. If someone visiting your premises sustains an injury caused by disrepair, like a loose floorboard, a chipped tile or broken step, then you could be held liable. The same as for a fall, you could be dragged into court, and face unknown penalties and legal costs.

Health hazard

This is particularly true if you run a food supply service or restaurant, host catered events or provide refreshments at a trade show.

Even if all you did was to offer a sustomer a friendly cup of coffee.

If a member of the public falls ill after consuming your food or visiting your business, or something in the food causes physical damage, like a sliver of glass or a rough nail, you could be faced with a costly claim.

What doesn’t public liability insurance cover?

Public liability insurance only covers your legal liability for an accident made against you by members of the public.

Public liability insurance does not protect a business against:

  • Claims from sexual harassment, wrongful termination of employees, failure to employ or promote, or race and gender lawsuits. These and other employee-related claims are covered by employment practices liability
  • Claims related to operating an automobile or truck in carrying out your business. You need separate commercial automobile coverage to protect you and your employees against liability claims resulting from car accidents. You may also need personal injury protection (PIP) which provides coverage for medical, rehabilitation, funeral, and lost wages to the insured and their passengers regardless of who was at fault.
  • Wrongful practices in your actions as a product or service provider – for example as a healthcare provider, lawyer and accountant, contractor, dog walker, and any other business or activity for which you are charging. Professional Liability insurance – sometimes known as Errors and Omissions insurance, covers faulty service (errors) or failure to provide a service altogether (omission).
  • Businesses may also want to consider product liability insurance. Product liability coverage protects your business if there’s a claim due to a defective product.
  • Claims by employees who suffer a work-related injury or illness are not covered by public liability insurance – for this you need Workers Compensation insurance. Workers’ compensation insurance is usually required by law for companies with one or more employees. Typically, workers’ compensation covers the employee’s medical expenses, rehabilitation costs and missed wages.

An umbrella liability policy provides extra protection above a standard public liability policy.

Umbrella policy coverage is appropriate for business owners who have large assets or may be especially vulnerable to lawsuits.

How much public liability cover do I need?

The level of public liability insurance you need will depend on your type of business, its location, and many other individual factors.

If your business poses a high level of risk – for instance, if your chances of being sued are high or you are working in public spaces, you should probably buy more cover for your business.

Example of this would be a floor tiler who works on customers’ sites and has to disturb public access areas.

As long as people are walking around in your work area, the chance of an accidental fall, and substantial damage, is high.

If you work from home with few customers calling around to you, you’ll probably need a lower amount of protection.

An example of this would be a photographer where your customers come to your private studio.

The risk is not completely eliminated, since any accident that happens while they are with you could give rise to a claim, but in general the level of risk is lower than if you were shooting on the roof of a building.

In most cases for sole traders and SME businesses, the most appropriate level of public liability cover would be around a quarter of a million dollars for a single claim, and an aggregate of half a million per year.

That means that the total of all claims for the year cannot exceed $500,000.

Bigger businesses will often need more cover, but these can be good guidelines when it comes to getting insured.

Can I get short-term public liability cover?

For time-limited events, such as fetes and concerts, which have their own risks, short-term insurance may be a good option.

For example, if you’re charging for entrance, you’ve hired a venue, and are catering for the event, something unexpected could cause damage to the rented space, or cause illness from food poisoning, or cause injury to a member of the public.

A claim from anyone of these could end up costing you hundreds or thousands of dollars.

Insurance for the whole duration – with overlap for before and after to cover set-up and clear-up, is a sensible choice.

However, if you are doing these events regularly or frequently, temporary cover will work out more expensive over the full year than taking out annual insurance.

Your insurance broker can advise on your best options.

Is it a legal requirement to have public liability insurance?

There’s no law telling you that you must be insured – but you might regret it if you tried to save a few dollars and end up losing your life savings.

If someone sues your business and you don’t have public liability insurance, you’ll have to hire a lawyer yourself up-front.

If you lose, you might have to pay a hefty settlement. On top of that, the court can even order you to pay the other party’s legal fees.

Even if you win the case, you could still be left to pay your own lawyer, and these costs can run up quickly.

Only in very rare cases is it possible to claim back some of these expenses from the person who sued you, and even then they’re very rarely paid in full, if at all

How much does public liability insurance usually cost?

The cost of your premium is usually based on:

  • the nature of your business
  • the number of people you employ
  • the level of insurance you choose to take out
  • your insurance claims history

Public liability insurance typically costs $35-$55 per month based on the factors we outlined above, which would give around $250,000 one-claim and $500,000 aggregate cover for a single year.

Paying more than $100 per month is unusual for small and medium-size businesses.

Final thoughts

Liability insurance generally isn’t a legal requirement, but some businesses cannot get work from government or large corporations unless they can show that have adequate liability insurance.

Public liability insurance covers the cost of claims made by members of the public for accidents that occur in connection with your business activities.

It helps to cover the costs for personal injuries, loss or damage to property, and death. It really is difficult to justify not having such cover, since the costs are very modest, and the risks of not having cover are truly enormous.

Bottom line is you can’t suffer much by having too much insurance – just a few hundred dollars at most.

But your business can be wiped out if you don’t have any insurance, or even if you don’t have enough insurance.

The peace-of-mind that proper insurance gives you is worth every cent!

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