A Guide to Public Liability Insurance

Public liability insurance could be the most important cover you have. Not only does it pay out for claims that could otherwise topple a successful business but in many cases not having it would put customers and partners off using your services. Our simple guide looks at the main features and pitfalls.

What is public liability insurance?

If a customer or third party person was to injure themselves or have something damaged as a result of your business activities, your business could be held liable. This means that you would have to pay the compensation claim and incurred legal expenses. If you have public liability insurance it can cover these costs.

 

What does this mean in simple terms?

If a customer slips on a wet floor in your business premises, or someone falls on some stairs because of a ripped carpet, your business could be liable because of its responsibility to provide a safe environment for the public.

Do I need public liability insurance?

Almost every business should have some form of public liability insurance. Despite all the precautions under the sun, accidents can and will happen, and being vulnerable to a law suit can spell disaster for a growing business.

In fact, many other businesses will not work with you unless you have PL insurance. Local councils often require businesses under their catchment to have public liability in place before trading.

Public liability insurance is not usually a legal requirement like employer’s liability insurance, but the fact that it is designed to cover claims into the millions shows you how just important it is. There aren’t many businesses that can safely operate without this protection, and you have an ethical duty to be able to provide compensation should someone suffer loss as a result of your business.

How does it protect my customers?

If a customer, visitor or any third-party damages a possession or suffers some kind of loss or injury as a result of your business, you would want to be sure that you can provide compensation. As a business owner you have a duty of care to make sure members of the public are safe by carrying out risk assessments and health and safety checks. Regardless, if an incident for which you were liable happens despite all your precautions, you risk both the public's and your business's safety by not being adequately covered.

Duty of care for a business

The duty of care that should be provided can vary depending on the person. It's important to understand how and why it can differ, in order to judge the correct level of public liability insurance required. There are three different categories a member of the public could fall into:

Invitees

Invitees are members of the public who interact with your business at your invitation. This may be via advertising, or simply a sign on the door that is also an implied invitation, based on the fact that you have a public premises. Contractors and business partners are also invitees.

Your duty of care is to take all reasonable steps to provide a safe environment for them to interact with your business. Their duty in return is to provide reasonable care for their own safety.

Licensees

Your duty of care here is not as high as with invitees, because licensees are members of the public who are on your premises with permission but without invitation. For example, they can be guests hoping to do business such as salesman.

If you had a business premises with unlocked doors but that is not expressly open to the public, you might expect these types of visitors.

Trespassers

A business has a duty of care to anyone on their premises, even people you are denying entry to. Trespassers are defined as individuals or groups on your property without your permission. The duty of care extends to them with the agreement to not create deliberate danger.

What does public liability insurance cover?

The possibilities of course are endless but as a rough guide the common claims come under these areas.

Disrepair

Tree roots, snagged carpets, a protruding screw head or broken door. Your duty of care dictates that you maintain the properties and places of work but accidents still can happen.

Slips or trips

Pubs, shops, offices and any private or public area you work could see a hazard created by something spilt by someone or something in your business.

Accidents

Such as items being dropped, falling or breaking whilst in use. These can cause accidents or damage in ways which can’t be predicted. Against all risk precautions insurance for these unavoidable events should always be in place.

Transport

Work vehicles, goods being moved in transit, transporting people and driving for business use possess a risk to anyone coming into contact.

No business fits neatly into any one risk category because each one is unique. The job of a specialist insurer is to understand your industry and get to know your business model. That way they can provide or source the cover that best protects your customers.

How much public liability insurance do I need?

This question is a bit like asking, “How long is a piece of string?”. You need as much as you need for your specific risks, and for each business this is different. You can source cover as low as £1 million although any business with any regular contact with the public will most likely start there cover at £2 million at the minimum. Cover generally goes up to around £10 million and most small to medium businesses fit themselves somewhere in the middle. Your local council or work contracts may also impose minimum levels on you.

You may find some advice from the governing bodies in your particular industry and your insurance adviser will be able to talk you through the process of working out what you might need.

What else do I need?

Public liability insurance is not generally brought in isolation. This is because most businesses require some other cover including employers' liabilityproduct liability or contents cover. We offer a range of business insurance covers so can tailor your policy to suit your business' requirements.

About the author

Mike Stephens is a respected senior industry professional and Fellow of the Chartered Insurance Institute (CII) with well over 40 years’ varied experience in the commercial insurance sector as a director, underwriter, and operational improvement manager.

This is a marketing article by Towergate Insurance.

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