Summary
- Public liability insurance covers your business if a third party is injured or their property is damaged due to your business activities.
- It typically covers compensation payments, legal defence costs and claims arising from negligence.
- It does not usually cover employee injuries, professional advice or damage to your own property.
- This guide explains public liability insurance for Australian business owners, including what it covers and key limitations.
- It is prepared by LegalVision’s business lawyers, a commercial law firm that specialises in advising clients on risk management and business protection.
Tips for Businesses
Assess your risk exposure based on your industry and interactions with the public. Choose an appropriate cover level, often between $5M and $20M, and check contractual requirements. Review exclusions carefully and combine with other policies, such as professional indemnity or workers’ compensation, where needed.
Public liability insurance covers your business for claims made by third parties for personal injury or property damage arising from your business activities. It typically includes compensation payments and legal costs, protecting your business if a customer, supplier, or member of the public is injured or their property is damaged due to your operations or premises. This article explains what public liability insurance covers, how it works, and what your business should consider when taking out a policy.
What is Public Liability Insurance?
Public liability insurance protects your business against claims from customers, suppliers or the public arising from accidents, property damage or injuries that occur during your business activities. Alternatively, the damage may occur when a client or customer uses your products or services.
As with most forms of insurance, various levels of public liability insurance are available. The level of cover you choose for your business will usually depend on a risk assessment of:
- your business activities;
- whether a contract requires you to have a minimum amount of public liability cover; and
- your business’s likelihood of exposure to public liabilities.
For example, suppose you are a medical centre with patients frequently walking in from the street. In that case, you will have a higher risk of public liability than a business working in an office setting simply because you regularly interact with members of the public.
Public Liability Insurance vs Professional Indemnity Insurance
Public liability insurance covers claims from the public for personal injury or property damage caused by your services or products. Alternatively, professional indemnity insurance covers claims from clients against the erroneous or negligent provision of your professional services.
For example, suppose you are a doctor and mistakenly provide incorrect health advice to a patient. Your professional indemnity insurance policy would usually cover the patient’s claims of harm. Alternatively, assume the patient sat down on a chair in your medical practice, which then broke, causing them injury. Here, your public liability insurance will cover the claim arising from this situation.
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Legal Requirement for Public Liability Insurance
Sometimes, contracts require you to have public liability insurance before providing goods or services. For example, suppose you are a contractor. The company hiring you may require you to maintain a public liability insurance policy of $20 million for any one claim for the duration of the contracting arrangement. Besides this, there is no mandatory legal requirement to obtain public liability insurance unless you operate under a government-issued licence. This includes if you are in trades such as plumbing or electrical.
However, businesses should obtain public liability insurance for protection. This is because the cost of holding public liability insurance generally outweighs the risk of defending or settling a third-party claim. This is particularly true if you operate your business in a public space. Additionally, it also applies if you interact directly with your clients or customers on your premises.
Coverage
Examples of claims include:
- loss or damage of a third party’s property whilst you are performing your business’ services;
- injury, emotional distress or death of a person from visiting your premises or interacting with your business;
- first aid expenses incurred as a result of an incident; and
- reasonable legal fees incurred to defend a claim.
Exclusions to Coverage
Public liability insurance generally does not cover:
- your responsibility as an employer for employee injuries (this is typically covered by workers compensation insurance). Although this may exclude people working for you who are not considered employees, such as volunteers, unpaid work experience interns and labour hire workers;
- injury or death suffered by you as the business owner;
- damage of your property as a business owner;
- professional negligence such as negligent advice provided to clients (this is usually covered by professional indemnity insurance);
- liability and indemnities assumed under a contract which you would not typically have been liable for at common law had you not signed the contract; and
- certain types of products such as asbestos products.
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Key Takeaways
If your business often interacts with persons in public, you should have insurance. Public liability insurance is often highly recommended as a risk management strategy. This type of insurance provides businesses with peace of mind knowing that claims arising from third-party injury and property damage are covered.
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Frequently Asked Questions
Whether or not contractors are covered by public liability insurance will depend on the type of work they did and the level of control you had over their work during your arrangement with them. As contractors may count as a third party to your business, it is important to check with your broker as to whether your specific public liability insurance scheme covers claims raised by contractors should an incident occur.
The level of cover you choose for your business will usually depend on a risk assessment of your business activities, whether a contract requires you to have a minimum amount of public liability cover and how likely you are to be exposed to public liabilities. Often, the minimum amount of public liability insurance you can take out is $5 million.
Public liability insurance covers claims from third parties for personal injury or property damage caused by your business activities, products or services. It also covers compensation and legal costs associated with those claims.
Yes. It typically covers reasonable legal expenses you incur defending a claim, as well as any compensation you are legally required to pay.
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