If you’re self-employed or run a business where you interact with the public, it’s advisable to get public liability insurance.
As a business owner, you may find yourself the subject of legal action by a member of the public – even if you feel you haven’t done anything wrong. If you’re cleared of any claims, you may still be left with sizeable legal costs. Having the right insurance can help you manage those situations.
We’ve put together this guide to cover everything you need to know about public liability insurance (PL). It answers the most frequently asked questions about this key type of business insurance cover.
- What is public liability insurance?
- What type of claims does it cover against?
- What doesn’t it cover?
- Do I need public liability cover?
- Is it a legal requirement?
- Do I need public liability cover if I’m self employed?
- How much cover does my business need?
- What is your public liability risk profile?
- Do I need to carry out risk assessments?
- How much does public liability cost and are there short-term cover options?
Public liability insurance is designed to protect a business’ legal liability against action bought by a member of the public who has been injured or had their property damaged as a result of a product or service you have provided.
If the claimant is successful you may have to pay a financial sum decided by the courts, plus legal costs and damages. That could include medical treatment fees or the cost to repair/replace the property damaged. A PL policy can cover you for these expenses – without insurance, you will have to pay out.
The type of claims covered by public liability insurance vary between providers. However, most PL policies provide cover for claims made in four key areas:
- Damage to property
The most common PL claims come under 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 ornament.
- Slips, trips or falls
Accidents happen and visitors to your business could slip, trip or fall resulting in an injury. For example, if a customer visits your shop and slips over on a recently mopped floor, breaking their leg. Should they make a claim, you could be held liable and find yourself subject to an expensive lawsuit.
As a business owner, you have a duty of care to maintain your property so it is a safe environment for your workers and the general public. If a visitor to your premises sustains an injury caused by disrepair, you can be held liable. Disrepair claims can be caused by items such as a loose floorboard, protruding nail or broken step.
- Causing illness
If a member of the public fell ill after visiting your business, you could be faced with a costly claim. This is particularly relevant if you own a catering company or restaurant, but you don’t necessarily need to trade in a food service to be found responsible for causing illness. This type of claim could arise if you were to host a catered event or provide refreshments at a trade show and someone became ill afterwards, for example.
Public Liability insurance only covers your legal liability for an action made against you by members of the public.
To be covered for claims made against you by your employees, you need employer’s liability insurance (a legal requirement if you employ anyone), and if it’s a client claiming against you for bad advice you should look at professional indemnity insurance.
You should consider public liability insurance if your business works with the public in any way. This includes businesses where people are regularly on the premises, such as shops, cafes, pubs and restaurants. Businesses that involve working in public places or private homes such as plumbers, electricians and building contractors should also consider a policy.
If there is any chance a member of the public could be injured or have their property damaged while you are working, then you should have public liability insurance.
Businesses may also want to consider a commercial combined insurance policy, which includes public liability insurance.
Public liability insurance is not a legal requirement for the vast majority of businesses (teaching horse riding and aircraft operators being the exception). However, PL is required by many regulatory bodies and can be necessary for a license to operate in some trades. You may find that potential clients, including public bodies, will not work with you unless you have PL.
Self-employed individuals are most in need of public liability insurance. If you are a sole trader, this should be the first form of business insurance on your list. You will be responsible if something goes wrong and a member of the public is hurt or has their property damaged because of your actions. You don’t have a big company behind you, so legal costs, damages and compensation could wipe you out. Having PL in place also assures your clients that you are a reliable trader who is serious about their responsibilities.
Levels of public liability cover vary and the amount you need depends on the type of work you do and the area in which you operate. For example, if you are a plumber and only work in private houses £1m or £2m may be more than enough. However, if you work in large commercial buildings, the extent of damage that could be caused by a fire starting as a result of some ‘hot works’ you have completed would suggest a limit of £5m or more would be more suitable. If your business interacts with members of the public or carries out high-risk activities, more cover will be needed.
Typical policy limits
Insurers usually offer different levels of cover, depending on your type of business and how much cover you need. The most common limits are £1 million, £2million, £5million or £10million. For large or very high risk businesses, a policy with a higher limit could be arranged if needed.
While even the lowest levels of cover sound excessive for a small business, it’s important to bear in mind what charges you may face if someone were to make a successful claim. You could have to pay compensation for medical treatment, ongoing care costs and loss of earnings. In the worst case scenario, where someone sustains a long-term injury, these costs could become an enormous bill over time. Also, if found liable, you might have to pay for the claimant’s legal fees, as well as your own.
Your business could be at high risk for public liability claims without your realising it. Businesses that are considered high risk typically include:
- Any business activity in which you or your staff are in frequent contact with the public.
- Any business activity involving potentially hazardous equipment or machinery
- Any business activity involving potentially dangerous materials
So, with these in mind, if you have a public facing business, such as a café, restaurant or shop, or a business which frequently works in potentially dangerous situations, such as mechanic or construction work, you are likely to have a high risk public liability profile. Conversely, if you only deal with clients over the phone, you’re likely to need a much lower level of cover.
It is your responsibility as a business owner to make sure that members of the public visiting your premises are as safe as possible. Among other things, this responsibility includes carrying out risk assessments and reducing any identified risks as much as you can. This applies on both your business premises and at any place where external activities are carried out by your business.
If you’re not sure where to start with risk assessments, or business health and safety in general, Alan Boswell Risk Management can help. Click here to find out more about their new ‘business health check’ service.
Yes, you can get public liability insurance cover for as little as one day. This is perfect for events, such as fetes or fundraisers, which come with their own risks. For example, if you’ve hired a venue, DJ and catering for your fete, any one of these could cause damage to the rented venue, illness from food pointing or injury to a member of the public. A claim from one of these scenarios could end up costing you hundreds or thousands of pounds.
However, if you host multiple events in a year, temporary PL cover tends to work out more expensive per event than annual or monthly insurance. If you’re holding an event more than once a year, it’s worth considering an annual policy – your insurance broker can advise on your best options.
How much does public liability insurance cost?
The cost of public liability insurance varies depending on the nature of your business, how much insurance you want, and who supplies the cover.
The key consideration for insurers is the level of risk. For example, if you work at height or with dangerous substances your risk will be higher. You should also decide on the amount of cover you need. £5-10m is standard, but if your line of business could leave you open to extremely expensive claims, you may want to exceed these limits to ensure you’re fully protected.
Remember: PL is a tax-deductible business expense. It can be bought on its own or as part of a general business insurance policy. Always be honest and transparent about the nature of your business and the risks involved. It may increase your premiums, but if you withhold information, you won’t be covered in the event of an accident.
Failure to have public liability insurance when you need it could seriously damage your business’ reputation and finances. You owe it to yourself to take out comprehensive public liability insurance so that you and those around you can enjoy peace of mind while working responsibly for and with the public.