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Who Needs Public Liability Insurance?

From sole traders and associations to high risk organisations, find out if you need public liability insurance. Learn how to measure your business’ risk profile and reduce the number (and impact) of potential PL claims.

What is public liability (PL) Insurance?

Public liability insurance covers you against allegations of accidental loss or damage caused to third-party property (i.e. personal belongings, equipment, product, property, etc.) and accidental injury claims arising from negligence on behalf of you or one of your employees. If a third-party experiences property damage, bodily injury, or is killed while completing your work, they may hold you responsible. PL insurance will help you cover your legal defence costs and, in the event of you being at fault, will pay the cost of the claim, as well as court and claimants’ legal fees (up to the limit of Indemnity you select).

Public liability can also relate more broadly to members of the public that visit and incur damage or personal injury while on your business premises. This could be for a variety of reasons, such as slips and trips due to damaged carpets/stairs or liquids spilt on floors.

Who needs public liability insurance?

While not a legal requirement, all businesses - from sole traders, partnerships, limited companies, clubs, and associations - are exposed to the potential allegations of negligence and should have public liability insurance.

If personal injury claims arise, the court awards and legal defence costs can be significant. This can rise in the most serious of accidents to many thousands of pounds to take account of compensation and the costs of medical and long-term care. PL coverage is essential should people visit your business premises, or if you carry out any work away elsewhere.

From high street retailers, hardware stores, restaurants, bakers, butchers and candlestick makers, no matter what the type of business, all have a need for public liability insurance. In addition to the risks of slips and trips on premises, there are the similar accidental damage and personal injury risks that are associated with the supply of products. In most cases, it is in your business' best interest to have PL insurance for the reasons outlined below.

Most business owners

As most business owners hire employees or have direct physical interactions with suppliers, stakeholders, and customers (on business premises), public liability insurance is highly recommended. The production, repair, supply, sale, and consumption of goods can also result in potential damage or injury to individuals and their property arising from defective or faulty manufacture. Product liability insurance would be required in the latter circumstance.

Even as a sole trader or charitable organisation, it is essential to have small business public lability insurance.

Large-scale businesses

The potential risks are escalated in large businesses where there are higher employee and customer numbers, as well as increased scale of production. Products could also be exported elsewhere in the world where legal costs and court awards could be even higher than in the UK. It is very important that you let us know a breakdown of your export turnover and the countries involved to ensure that the relevant territories are included in your global public liability insurance policy.

High profile businesses

High profile businesses and famous brand names have an even greater need for public liability insurance - requiring higher limits of cover. We deal with a panel of carefully selected insurers who understand the need to provide excellent claims service to ensure that reputational damage is avoided. Public liability insurance supported by proactive risk management is important to identify hazards and implement mitigating actions to reduce the potential for claims to arise. 

Interactive environments, services, and products

Some environments, such as gyms, hotels, mobile hairdressers, restaurants, cafes, and shops are extremely dynamic, with a range of services and products supplied, as well as multiple points of interaction. All present a potential risk for slips, trips, hygiene issues, and injury. This has become even more evident due to covid-19 and the safety measures that have been put in place.

Public liability risks are only heightened when customers, suppliers and the general public are on the business premises for extended periods of time, such as a long stay in a hotel or guesthouse.

High risk businesses

Some businesses may demand a greater need for public and products liability insurance based on their very nature. Examples include, working in hazardous areas or locations, at height or depth, using processes involving the application of heat or dangerous chemicals. Other high-risk situations include, exposure to high value property, computers, production lines, storage facilities, and a large accumulation of customer numbers in buildings, halls, or arenas.  

Working for main contractors, local authorities, councils or larger businesses, there are often stringent contractual necessities, specifying minimum insurance requirements. It is important to carefully check the small print to see what levels of public and products liability insurance are needed, before you start working for them.

Measuring your business’ public and products liability risk

This is important to not only measure your need for coverage, but to determine the level of protection that is required. Policies can be tailored depending on the risk profile of your business and the potential values of claims that can arise.

The type of business

The type or nature of the business has a huge impact on its public liability risks faced. For example, most spas, beauticians, and mobile hair stylists provide a variety of treatments and procedures that could have an adverse effect on the customer if something goes awry. It should be borne in mind that simply asking customers to sign disclaimers does not affect their legal rights to claim against you if you have been negligent, resulting in injury. If you choose to adopt these clauses or notices, then you should seek specialist guidance from your legal advisor.

Ultimately, there is no substitute for a good public/products liability policy, as claimants can still take you to court and contest your disclaimers/terms. If you are found to be at fault, then you will be liable for claimants’ costs, expenses and compensation awarded.

This is equally an issue for tradesmen, such as on-site building contractors and allied trades, i.e. carpenters, electricians, plumbers, bricklayers, roofers, etc. All of whom can work in hazardous or challenging circumstances, at height or depth, in high value premises and locations involving the use of powered machinery or handling potentially hazardous chemicals.

Note: Liability policies will not cover you for penalties and fines should they result from breach of regulations, e.g. health and safety legislation.

Size and prominence of the business

As the business becomes bigger, taking on larger contracts, more employees and sub-contractors increases your responsibilities. As does the potential for things to go wrong, through insufficient supervision or inadequate controls. Society, i.e. your local community, will have high expectations of prominent local businesses. So, if things do accidentally go awry, there is the expectation that wrongs are righted. Any lawsuits can become highly publicised and damaging to the reputation of the company in question. It is therefore important to have the support of public liability insurance to defend you in allegations of negligence, and to pay the compensation where you are found to be at fault.  

Extent of potential damage/injury

Risk profile is also based on the extent of potential damage or injury that can arise from your business activities. Are you a contractor, manufacturer, supplier, retailer, wholesaler, distributor, or a provider of goods/services? What type of goods do you make, repair or supply? Do they have any dangerous or hazardous characteristics? Can defective work have potentially expensive consequences?

For example, faulty plumbing work can lead to extensive water damage to a property. Meanwhile, defective installation of a railing on a high-rise building could lead to severe injury or even death. Certain industries, such as those that deal with chemicals and vehicles, are inherently more dangerous, with the possibility for more serious repercussions should something go awry. As a consequence, higher levels of public liability are required – in the region of £5m, £10m or even higher.

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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