What risks does public liability insurance protect against?

Public liability insurance protects businesses against liability owed to the public (being a ‘third party’). That liability can include things such as loss arising from personal injury, death, advertising injury or property damage that can happen in connection with your business.

Insuring your business against liability owed to the public can protect your business against various risks. If there is any chance that your business activities can result in any personal injury, death or property loss or damage, you should ensure that you have a policy of public liability insurance in place to safeguard your business from financial loss.

Author: Farrah Motley, Director of Prosper Law and a commercial contract lawyer.

If your business deals with clients, customers, contractors or suppliers:

in public places;

• in spaces owned or controlled by others;
• at your business’s premises, including an office, shop, warehouse or distribution centre,

public liability insurance is the best way to protect your business against potentially costly personal injury or property damage claims.

These policies are important for many different businesses, whether you are an industrial electrician, an engineer or a builder.

The insurance policy

To get an accurate picture of what any given insurance policy covers, you must read the policy itself. Each insurance policy is different, including the insurance coverage, exclusions, who is insured under the policy, the insurer, the premium and many other aspects of the insurance policy.

In this article, we’ll talk about policies of public liability insurance in general terms, but it is important that you read your policy to determine precisely how your business is covered.

The risks that are generally covered by public liability insurance

Some of the things that public liability insurance may cover include:

• Legal costs incurred to settle and defend a claim
• Cover for those who may be acting on behalf of your business at the time when the incident occurred
• Loss or damage to goods that are in your custody or care or control but you don’t own them
• Loss or damage of somebody else’s property that might occur while your business is performing its services
• Injury to someone else who has sustained an injury while visiting your premises
• First aid expenses at the time of an incident

There are a number of risks that are covered by public liability insurance.

However, the main focus of a policy of public liability insurance is personal injury and property damage. If your business is responsible for some kind of personal injury to another person or damage to property owned by another person and that damage has been caused by something your business did (or didn’t do), that third party may have a legal claim against your business.

If your business is considered liable for that loss or damage, your business may be required to pay a significant amount in compensation. A policy of public liability insurance can protect your business and contribute to the amount of compensation you may be required to pay.

If you have public liability insurance, your insurer can help you in determining exactly what you are responsible for. If they feel that you are responsible for the loss/damage, they will ask you to make an out of court financial settlement with the person. If the case does go to court, then your insurers will be responsible for bearing the financial costs awarded by the court. Of course, if the incident is covered by your policy and the cost is within your sum insured.

Everyday examples

LABOUR HIRE WORKERS:

Where a business (a host employer) hires workers through a labour hire agency, those workers are not covered by the host employer’s workers’ compensation policy. Instead, if a labour hire worker suffers an injury while carrying out work for the host employer, the host employer may be covered by its public liability insurance in relation to a claim made by the labour hrie worker.

MEMBERS OF THE PUBLIC THAT ENTER A STORE:

A business that owns or rents a store owes a duty of care to members of the public that enter that store. If the store visitor injures themselves while in the store, the business may be able to rely on their public liability insurance if a claim is made against them.

• Asbestos
• Aircraft products
• Liquidated damages
• Products recall
• Gradual pollution
• Employer’s responsibility for injured workers
• Punitive damages (damages awarded where the judge believes that the actions are so bad that extra damages need to be awarded)
• Liabilities that you would not have been liable for at common law if not assumed by signing a contract

Every public liability insurance policy has certain things that are excluded from its purview. While some of them are common to every policy, some are also unique to specific policies.

The events in which a public liability insurance policy will not cover are:

• A deliberate act to cause injury or damage
• Personal injury or property damage caused to you or your employees
• Unlawful activity

There can be certain exclusions on these policies that apply to some occupations and business types. These include working on high-risk locations such as airports and mines, working on marine vessels over a certain size, and working on construction projects over a certain size. Most mainstream public liability insurance providers do not cover such events. However, you can always take help from specialist insurance providers, also known as underwriting agencies.

Where there is a risk of personal injury or property damage to others because of business activities, the business must have this insurance cover in place.

Various trade occupations and businesses are required to have this insurance cover so that they can obtain their contractor’s licence. For instance, the Victorian plumbers and the Tasmanian and Queensland electricians fall in this category. Even for some tradesmen also, it is mandatory to hold public liability to be able to enter their worksites of some building and construction companies. Self-employed and subcontracting tradesmen fall in this category.

What are the risks of not having public liability insurance?

Significant Expenses

In case something goes wrong at work, a claim for damages can make you lose a hefty sum of money from your pocket. This is because, with time, your business grows, and you start taking on larger projects. With that, the risk for claims also rises. Moreover, if you are found liable after a claim, you might have to bear the cost of repairs, replacements, medical bills, rehabilitation, and any other expenses.

Difficulty in Obtaining Work

In general, public liability insurance is not a legal requirement. However, some people might find it hard to obtain their licence for work unless they have this insurance cover in place. On the other hand, some employers can also refuse to take on subcontractors until they provide evidence that they have public liability insurance.

Significant Legal Fees

There can be cases where the court fails to find you responsible, and the claim for damages is ruled unsuccessful. In such cases also you will more likely be left with an exorbitant legal bill. This is because of the legal representation or advice you will be requiring during the claim process. Public Liability Insurance can ensure that these legal expenses are also covered, even if you are not responsible for the damages.

Summary

Public claims against businesses can be very costly and can interrupt trading as well. This not only impacts the hard-earned reputation but also affects the revenue flow. That is why every business needs to get suitable public liability insurance coverage that can help them mitigate against these factors.

Farrah Motley | Director

PROSPER LAW – Australia’s Online Law Firm

M: 1300 003 077

E: farrah@prosperlaw.com.au

W: www.prosperlaw.com.au

A: Suite No. 99, Level 18, 324 Queen Street, Brisbane, Queensland Australia 4000