What is Public Liability Insurance?

If you run a business, charity or organise public events you may have been told that you need Public Liability Insurance, but what is it and why might you need it?

The purpose is to protect you (the policyholder) from financial losses that you may incur as a result of compensation claims made against you in relation to your business or event.

In return for the premium paid, the insurer will handle claims for compensation made by members of the public for injuries or damage to property. The insurer will pay the damages to the third party up to the agreed indemnity limit on your policy. Indemnity limits are usually set at £2 million, £5 million or £10 million.

Premiums for liability policies can vary hugely, a small village church committee that holds 4 events per year may only pay double figures in premium whereas a large manufacturer may pay hundreds of thousands of pounds per year. Underwriters will look at the degree of risk presented by the activities you undertake and the limit of indemnity you require in order to calculate the premium.

Policies may include sub-sections of Products Liability or Sales & Service Indemnity that cover damage or injury incurred as a result of products you have manufactured, sold or repaired.

Public Liability insurance is not a legal requirement but is a sensible precaution to take if your business involves interaction with the public whether at your own premises or working away.

Here are a couple of examples of claims under public liability;

A builder is constructing a new property and a wall collapses, falling onto a passing Ferrari, the cost of repairing the damage to the vehicle is £100,000. The builder will only have to pay his excess (Usually £250 / £500) with the balance being covered by the insurer.

A motor mechanic fails to keep members of the public out of the workshop area of the garage and someone slips on spilt oil, resulting in a broken leg. They decide to claim compensation against the garage owner. The claim is settled by the insurer for £10,000 (minus the policy excess).

In both these instances, without public liability insurance in force the builder and garage owner would have to settle the claims themselves, potentially putting their business at risk.

You may find that some contracts that your business has won or events that you wish to attend (such as trade fairs) insist that you have a certain level of public liability insurance in place.

Some policies contain exclusions for certain activities within your trade and it is important to read your policy documents carefully and ask your broker if you are unsure about the cover provided.

You may find that some contracts that your business has won or events that you wish to attend (such as trade fairs) insist that you have a certain level of public liability insurance in place.

Some policies contain exclusions for certain activities within your trade and it is important to read your policy documents carefully and ask your broker if you are unsure about the cover provided.

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