Public liability insurance is designed to cover you against a claim where a member of the public suffers injury, death or damage to their property whilst on your business premises or at an event or activity your business has organised (such as carrying out work at a clients property).
If a public liability (PL) claim is made against your business, you could be looking at a heavy financial settlement. PL cover is designed to protect your business against this kind of risk, this generally includes footing the bill on hefty compensation payouts and the legal costs associated with a public liability claim whether successful or unsuccessful.
It’s important to note that PLI doesn’t cover you for any injuries sustained by you or an employee, this kind of cover will come under employers’ liability insurance, which is a legal requirement if you have more than one employee.
Types of Claims Covered
What’s included under public liability insurance cover varies from provider to provider, however most PLI policies will cover claims made in these key areas:
- Damage to property – The most common public liability claims come under damage to property. Some of these may be accidents on the part of your employees – perhaps as a construction firm one of your builders dropped a hammer and damaged some floorboards. Other damage may occur due to factors entirely outside of your control. Storms can cause all kinds of damage to property – if your signage blows over and damages a car belonging to a member of the public, there is the potential for them to make a claim against you.
- Slips, trips or falls – People can slip, trip or fall even without an obstruction that could result in injury or even death. For example, if a delivery person slips down the steps on your business premises and injures themselves, you could be held liable if they make a claim. Even if it is not your fault, you could find yourself in an expensive lawsuit.
- Disrepair – Disrepair claims can come from anything from a protruding nail, a broken door, or a loose handrail on business premises. It is your duty of care to maintain your property and places of work so that they are safe environments for your workers and the public. If a customer, client or member of the public sustains an injury owing to any disrepair of this type, you could be held liable. Claims resulting from disrepair can include somebody tripping over a loose floorboard or snagging themselves on a broken gate.
- Causing illness – If your company is found liable for causing illness to a member of the public, you’ll likely have to foot a large payout. You may not trade in any product or service that relates to food, but should you provide refreshments at a trade show or run a catered event, you could be held liable if anybody falls ill. PL cover will typically protect you against any claims of causing illness.
Common Exclusions
Cover will vary from policy to policy. However, most policies don’t cover the following:
- Injury to employees – this is almost never covered under public liability insurance. You’ll need employers’ liability cover for this, which you can combine with PL cover with some insurers.
- Property belonging to the insured – this would come under a material damage policy.
- Injury or damage resulting from any products you design, supply, or sell. You’ll need separate product liability cover for these cases.
- Motor vehicles – claims of this nature often come under a motor policy.
- Any watercraft or aircraft related claims.
If any of the above common exclusions apply to your business, check the potential policy and be sure to discuss these options with your insurer. You may be able to add cover for these as optional extras or combine multiple policies in one package.
Does Your Business Need Coverage?
If you are interacting with the public it is usually advisable to take out PLI cover, even if you’re self-employed or working as a freelancer. The public can refer to customers, clients, suppliers or even the general public that you may encounter when carrying out work. There are three main ways that you might come into contact with the public, such as:
- customers visit your premises, for example, a shop, beauty salon, restaurant or office
- you work on client sites, for example as a tradesman
- you work in public, for example as a builder, where your work could cause damage or injury to a passerby
Most businesses have interaction with the pubic in one way or another and PLI claims are far more common than you might think (especially with the increase of no-win no-fee solicitors in the UK).
To help you decide on if public liability cover is relevant for your business, below are a few hypothetical situations where the right public liability policy would protect businesses from the financial costs associated with a successful or unsuccessful public liability claim.
- Builders – A builder accidentally bursts a water pipe during a renovation. The leak goes unnoticed and ends up flooding the ground floor and leaking into the neighbouring terraced houses. The customer and both neighbours file a claim against the builder. The claim is settled for £170,000. Thanks to their public liability cover, the plumber only pays the policy excess of £500.
- Tradesman – A carpenter is working on fitting a walk-in wardrobe at a customer’s home. A contractor trips over the carpenter’s toolbox while working and twists an ankle. The contractor makes a claim. The settlement takes into account lost wages, totalling £15,000. Fortunately, the carpenter has tradesman insurance (typically includes PL cover of some form), meaning he only has to pay his modest excess.
- Cleaners – When a cleaner knocked over and smashed an antique vase, his client filed a claim against him for the repair. What would have been a £6,000 settlement only cost the cleaner a few days work. Cleaners spend all day going in and out of other peoples’ homes. When moving other people’s possessions, in this case it is almost always vital to protect yourself against liability for damage.
- Landlord – In the case of a rental property, even damp can come under disrepair: a tenant might claim against a landlord if the damp in a rented room causes them respiratory issues, or exacerbates other existing health conditions. Public liability cover is also often advisable for landlords to cover them against such claims.
- Musicians – Musicians are frequently transporting heavy equipment from venue to venue and may come into contact with thousands of members of the public at gigs and concerts. One musician drops a heavy amplifier down a set of wooden stairs at a historical venue, damaging several steps and chipping the handrail. The site makes a claim against the musician. Fortunately, although the settlement is over £10,000 to repair the damage, the musician must only pay her excess. For musicians, it’s worth noting that some venues will only let you perform if you have public liability cover (some venues will have their own cover that will cover you, you should check this beforehand). If a member of the audience injures themselves during one of your shows and points the blame in your direction, you could be found liable even if you are not directly responsible.
- Hairdressers -A professional architect goes for a haircut at her local hairdresser’s. While there, she trips over the wire from a hairdryer while a stylist is blow-drying another client’s hair. The pianist breaks her wrist from the fall. She makes a claim against the salon, requesting compensation for her medical fees as well as lost wages resulting from the injury. The claim is settled for £30,000, which would have easily put the family-run salon out of business. Fortunately, the salon had public liability cover, meaning they only had to fork out £250. Note that public liability cover does not cover compensation claims resulting from professional acts. As hairdressing is a professional activity, not all claims are included in a standard policy. Any claims resulting from the hairdressing itself would be excluded. This might be something like an allergic reaction to hair-dye used or a cut sustained from an electric trimmer. You must therefore opt for cover tailored to hairdressers, which may include a treatment risk extension to cover these situations.
- Charities – Almost all charities have constant contact with the public, whether that’s in a charity-owned shop or at a one-off fundraiser. Thus, PL cover is almost always necessary, particularly when charities have a large team of volunteers that could cause accidental damage to property or injury/death to a member of the public. Given the risk level, it’s advisable for most charities to obtain PL cover all year round, as even a planning meeting with members of the public could present lawsuit potential arising from a claim.
- Online Retailers – If you’re an online retailer and your entire business runs online, your public liability is likely to be very low. However, if you handle your own inventory and have warehouses where products are packaged and shipped there is a higher risk. In this case, you or your employees may encounter members of the public at the warehouse. In this case, you should consider public liability cover. All online retailers should also consider product liability insurance, which is often sold as part of public liability insurance, to protect against any damage or injury caused by products sold.
Extent of Coverage
How much public liability cover you’ll need depends on the size and the nature of your business. The more a business interacts with members of the public or carries out certain high risk activities, typically the higher the risk of a claim – thus more cover is needed.
Public Liability Risk Profile
Many businesses are high risk for public liability claims without realising it, high-risk businesses from a public liability perspective can typically be defined as carrying out:
- any business activity which involves potentially dangerous materials
- activities which involve potentially hazardous equipment or machinery
- any activities which put you or your employees in frequent contact with the public.
Businesses with a higher risk could include any public-facing business, such as a shop, café or restaurant. If you only deal with customers online or over the phone, you may only need a low level of cover.
Typical Policy Limits
Most insurance providers will offer different levels of protection, depending on what type of business you are and how much cover you think you’ll need. The limits usually provided are £1 million, £2 million, £5 million or £10 million. For large, high-risk businesses, policies of up to £50 million and beyond are available.
Even the lowest cover may sound excessive for a small business but bear in mind that an external party may demand compensation for loss of earnings, medical costs and ongoing care. For severe or long-term injuries, this combination of factors can rack up enormous fees over time. If you’re found liable, you may also have to foot the bill for the claimant’s legal fees, as well as your own.
Calculating Cost and Reducing Premiums
According to AXA, the average annual insurance premium for public liability costs £119.37. However, public liability policy costs vary from business to business significantly, for example with the average price for builders being £278.08 per year.
There are three principal factors which typically decide the cost of your public liability insurance premiums:
- Your trade or profession – businesses using lots of machinery or dangerous equipment will be more expensive to insure
- Your turnover – in most cases, the larger your business, the higher your premium
- Whether you have visitors to your business – if you have premises open to the public, you’ll have higher prices, especially if the public is at risk from any of your equipment or machinery.
Overall, it’s worth getting multiple quotes to find the best insurance deal for your business.
Lowering PLI Premium
There are some things you can do to lower the cost of your premium without losing any vital cover (whether you already have a policy or are looking at a new one), this includes:
- opting to pay a higher excess when you make a claim
- introducing mandatory staff training and ensuring all employees are appropriately qualified for their work
- ensuring business tools, equipment, machinery and premises are adequately maintained and regularly safety tested
- developing a risk-management plan
When looking for a policy, discuss these factors with your insurer to see if taking any similar measures can reduce your premium.
Final Thoughts and FAQs
Being found liable for causing injury, death or property damage to a member of the public can lead to significant legal costs and often crippling settlements if a claim is successful.
Even large companies can struggle to foot all the costs associated with a significant claim. Public liability cover is designed to shoulder these costs and mitigate the risk to any business from such a claim. Given, this if your business has any interaction with the public it’s definitely a type of business insurance you should consider purchasing. On a final note public liability is commonly confused with the two types of insurance detailed below, hence we’ve broken down how they differ.
- Do You Need to Carry Out Risk Assessments? – As a business owner you have a responsibility to make sure that members of the public are as safe as possible. This responsibility among other things includes carrying out risk assessments and mitigating any identifiable risks to members of the public as much as you can on your property and at any external activities carried out by your business. Your insurer will likely require you to have such measures in place for certain types of insurance to be valid including public liability insurance.
- Public liability Vs Professional Indemnity – Professional indemnity insurance cover and public liability cover are both important types of business insurance. Public liability insurance covers you against any claims made by members of the public for damage to property, illness or injury. Professional indemnity covers claims explicitly made by clients, for injury or damage caused by professional mistakes or negligence. For many professions, the difference between a public liability claim and professional negligence claim can be quite slight. Some insurers offer public liability cover and professional indemnity cover under a single business insurance policy, so it is worth discussing your situation and options with your insurer to decide on the right coverage and policy.
- Public Liability Vs General Liability – In America, public liability insurance is referred to as general liability insurance. In the UK, you won’t find general liability cover. Instead, you have public liability insurance, product liability insurance and employers’ liability insurance. You should consider one, two or all three of these to protect your business depending on your associated business risks and exposure.
