Public Liability Insurance
You spend hours planning ways to grow your business and make it successful. There are always risks when you interact with the public as part of your business day. No one wants to be blindsided by unexpected situations or circumstances. Public liability insurance can be one of the biggest decisions you make as a business owner. But it’s also the most important one.
What is Public Liability Insurance?
Public Liability Insurance protects businesses by covering claims for injury or property damage caused to others as a result of their business activities.
Business owners have what is called the duty of care whenever they encounter members of the public while doing their jobs and conducting business activities. No matter how large or small a business is, interacting with others can make you vulnerable to third-party accidents. Liability claims can end up carrying a huge price tag.
Working with customers, suppliers, or other members of the public can put you at risk for legal action. Contractors, office managers, and event organisers, who work in homes and business settings, need to be covered as accidents can happen. It may be something as simple as someone tripping on a power cord they didn’t see.
It’s not necessarily your fault, but you can be held liable if they become injured. Accidents, injuries, or property damage can happen to anyone at any time, no matter how careful you are.
Carrying public liability insurance covers your business and helps you avoid financially crippling litigation fees, allowing you to continue your day-to-day operations.
What Public Liability Insurance Covers
Public Liability Insurance covers businesses if someone gets hurt or has their property damaged while using your products or services, or during the course of your work. It will cover any compensation you are liable for and reasonable legal fees that you may incur to defend yourself against a claim.
Public Liability Insurance Covers:
Third-party bodily injury
It may cover claims filed by customers, visitors, or other members of the public if they become injured while at your business, or as a result of your business activities.
Third-party property damage
Insurance can cover claims made by someone else whose property was damaged as a result of your business activity. It covers personal property, venue elements, and equipment, for example.
Damage to property in your care
It covers property that becomes damaged while in your care, custody, or control if it occurs during an insured event.
What Public Liability Insurance Usually Doesn’t Cover
Public liability insurance doesn’t cover every injury or property damage. Here are some things it probably will not cover.
- Intentional or criminal acts: If you cause damage or an injury on purpose, or while breaking the law, insurance will not cover it.
- Contractual guarantees or warranties: If you promise something in a contract, your insurance will not pay for losses related to those promises.
- Asbestos-related claims: Injuries, illness, or damage caused by asbestos will be excluded from coverage.
- Pollution and environmental damage: Cleanup costs or claims linked to pollution, contamination, or other environmental harm are not usually covered by public liability insurance.
- Aviation/drones and registered motor vehicles: If damage or injury is caused by drones, planes, or vehicles that need to be registered legally, the claim isn’t covered under your public liability insurance policy.
Do I Need Public Liability Insurance?
Yes. You need public liability insurance if you work with the public in any business capacity. Yes, it is an added expense, but having coverage can save your business operations from grinding to a halt if something does happen.
Who needs to get coverage?
Contract & License Requirements
Organisations often make public liability insurance a condition for doing business. Landlords may require it before offering your business a lease. Local councils often request proof of insurance to grant permits for events. Venues often require proof of coverage before allowing trading on their property.
Contractors & Subcontractors
Liability is not transferable. Contractors and subcontractors can’t assume you are covered by a main contractor’s policy. Each business entity needs to hold its own insurance to protect itself against claims. Without it, if something goes wrong, you could be personally responsible.
Who does NOT need public liability insurance?
Businesses that have no physical interaction with the public, such as freelancers who work online. However, if you consult or counsel clients in your home or meet them in shared places, you may ask about coverage.
Pro Tip: Every business is different; make sure to check with a broker for recommendations tailored to your specific situation. Contact Sydney Insurance Brokers today for advice and get the right coverage for your business needs.
Public Liability Vs. Other Covers?
COVER TYPE
WHAT IT PROTECTS
KEY DIFFERENCES
Public Liability
Covers injury or property damage caused to third parties due to your business activities. Example: a customer slips and falls in your shop.
Focuses on accidents or incidents that happen to people or property while interacting with your business in person.
Covers injury or damage caused by products you have sold, supplied, or manufactured. Example: a faulty appliance causes a fire.
Applies after a product leaves your control, not during day-to-day operations like public liability.
Covers financial loss suffered by clients due to your professional advice, services, or designs. Example: an accountant provides faulty tax advice.
Unlike public liability, this deals with mistakes in professional judgment or advice, not physical accidents.
Cost Drivers and Why Premiums Differ
Premiums differ when it comes to public liability insurance, because they are not one-size-fits-all. They vary because insurers assess the different risks associated with various businesses and industries. These cost drivers include:
- Business activity/industry risk: High-risk trades like construction will usually have higher premiums than office-based consultancies.
- Location and public exposure: Businesses located in busier areas or those that deal directly with the public are more likely to have more claims.
- Turnover/size of business: Higher revenue often indicates greater activity, which can increase the likelihood of incidents.
- Employee numbers: Having more staff usually means more interactions with customers and the public, which raises potential exposure to incidents.
Understanding these cost drivers helps you see why premiums may vary for businesses.
Home-Based & Mobile Businesses
Running a home-based or mobile business doesn’t exempt you from risk.
- Home-Based Risks: If a client or delivery driver visits your home office, a simple trip could lead to a claim.
- Client-Site Risks: When working at a client’s site, accidents can happen, whether you are a tradie, consultant, or mobile service provider.
Remember, “the public” doesn’t just mean paying customers. It includes visitors, suppliers, and passers-by who might be affected.
Example Scenario: How Coverage Works in Practice
Let’s take a look at a scenario where public liability insurance can protect you and your business.
A café has a loose cable posing a tripping hazard. A customer wasn’t aware of the cable and wasn’t paying attention when they tripped over it. They severely injured their wrist and require ongoing, expensive medical treatment and therapies.
The injured customer can make a claim against the café for compensation. The business failed to take reasonable actions to prevent the loose cable and avoid harm to customers. If the café fails to carry personal liability insurance, the payout amounts can be above what they can afford.
Public Liability FAQs
Is public liability compulsory?
Public liability insurance is compulsory in some situations. For example, it is a requirement before a trade license is issued. If you want to lease a property to run your business, your landlord may require it. It is highly recommended for business owners.
Do I need public liability insurance as a contractor/subcontractor?
Any business that interacts with the general public regularly could have a claim for injury or damage brought against it if an accident occurs. Contractors, freelancers, and sole traders who work with the public need to be covered. You may also need to show proof of insurance before entering some contracts or work sites.
Does it cover injuries to employees?
No. Public liability insurance does not cover employees. It covers liabilities to third parties, like the general public and customers.
What’s the difference between public liability and professional Indemnity?
Public liability insurance covers you when your day-to-day business activities cause an injury or property damage affecting a third party. Professional Indemnity covers claims for loss or damage caused by mistakes in your service or bad advice.
Do I need it if I only work online from home?
If you do all your work online from home with no interactions with the public, then you probably do not need public liability insurance.
Can landlords or event venues require me to have it?
Landlords and event venues often require businesses to carry public liability insurance. Event venues may require organisers to have public liability insurance before they can rent the venue, even if it’s a small event.
