Most business owners first think seriously about public liability insurance when someone asks for a certificate of currency. It may be a landlord before a lease is signed, a head contractor before you get on site, or a council before an event goes ahead.
The usual response is to call a broker, buy a policy with the right dollar figure and send the certificate across. In our work reviewing commercial contracts and leases, that is often where the problem starts. The amount of cover is easy to check. Whether the policy actually responds to the risks the contract puts on you is a different question, and it is rarely asked.
The pattern we see most often is a subcontract or supply agreement that asks the smaller business to indemnify the larger one for almost any loss connected with the work, including losses the larger party partly caused. By the time the contract reaches us, the business owner has usually negotiated the price and scope carefully, and has accepted the indemnity clause as standard wording.
This guide, by our contract lawyers, explains what public liability insurance is likely to cover, where the common gaps are, and what to check before you sign a contract that relies on it.
Key Takeaways
- What it covers: Public liability insurance generally responds to claims by third parties (customers, visitors, members of the public) for injury or property damage connected with your business.
- What it usually doesn’t cover: Injuries to your own employees, professional advice, deliberate acts and liability you take on only because a contract says so are commonly excluded.
- Not mandatory for everyone: There is no general legal requirement in Australia, but some licences, leases and contracts require it.
- The contract gap: A contract may ask you to indemnify another party for more than your policy covers, which may leave you personally exposed for the difference.
- Policy wording matters: Two policies with the same $20 million limit may respond very differently to the same claim.
What is public liability insurance?
Public liability insurance is a business policy that may cover your legal liability to third parties for personal injury or property damage caused in connection with your business activities. Third parties are people outside your business, such as customers, clients, visitors, suppliers and members of the public.
Most public liability policies in Australia are written on an “occurrence” basis. This generally means the policy that responds is the one in force when the injury or damage happened, not when the claim was made. That is different from professional indemnity insurance, which is usually written on a “claims made” basis.
Do you need public liability insurance?
The short answer is that it is not legally required for every business in Australia, but many businesses may need it in practice. You are more likely to need it if:
- You hold certain licences: Some trade licences carry insurance conditions. For example, licensed plumbers in Victoria must hold the minimum insurance set by Ministerial Order (Victorian Building Authority). Requirements differ between states and trades, so it is worth checking with your regulator.
- You lease premises: Commercial and retail leases commonly require the tenant to hold public liability cover, often naming the landlord as an interested party.
- You contract with larger businesses or government: Head contracts, subcontracts, supply agreements and venue hire agreements commonly set a minimum level of cover.
- People come onto your premises or you work on theirs: The risk of a third-party claim is higher where the public interacts with your business in person.
What does public liability insurance usually cover?
Cover depends on the policy wording, but most policies are likely to respond to the following.
Cover area | Example |
Personal injury to a third party | A customer slips on a wet floor in your café |
Damage to third-party property | A tradesperson cracks a client’s stone benchtop during an installation |
Legal defence costs | Lawyers’ fees to defend a covered claim, usually subject to the policy terms and limits |
Compensation and settlements | Damages awarded or settlement amounts agreed with the insurer’s consent |
Advertising liability (some policies only) | A defamation claim arising from your marketing material |
First aid expenses (some policies only) | Immediate first aid given at the time of an incident |
Two points are often misunderstood. Legal costs are generally only covered for claims the policy otherwise covers. Settlements also typically need the insurer’s prior consent, and agreeing to pay a claimant without it may put your cover at risk.
A scenario we see in different forms: a cleaning contractor services a shopping centre under a contract with the centre manager. A shopper slips on a freshly mopped floor and sues the centre manager, which then calls on the contractor’s indemnity. If the contractor was negligent (for example, it put out no wet-floor signs), its public liability policy is likely to respond. If the claim against the contractor only exists because the contract says so, the insurer may rely on the contractual liability exclusion, which is where the problems tend to begin.
What public liability insurance usually doesn't cover
Exclusions vary between insurers, so the policy schedule and wording are the only reliable guide. Common exclusions include:
Common exclusion | What it means in practice |
Injury to your own employees | Generally covered by workers’ compensation insurance instead |
Professional advice or services | Generally a matter for professional indemnity insurance |
Liability assumed under contract | Liability you would not have had without the contract (see below) |
Deliberate or unlawful acts | Injury or damage you intended, or that arises from illegal activity |
Gradual pollution | Environmental damage that builds up over time, as opposed to a sudden event |
Asbestos | Claims arising from asbestos exposure |
Product recall costs | The cost of withdrawing defective products from sale |
Damage to property in your care | Goods you are storing, repairing or working on may need separate cover |
Aircraft, watercraft and some high-risk work | Often excluded or limited, with specialist cover available |
The contract gap: where we most often see problems
This is the part of public liability insurance that general guides tend to skip, and it is the area where a contract review may make the biggest difference.
Many commercial contracts and leases contain an indemnity clause. A broad indemnity may require you to cover the other party for losses “arising out of or in connection with” the contract, sometimes even where the other party was partly at fault. At the same time, many public liability policies exclude liability you take on under a contract unless you would have been liable anyway (for example, in negligence).
The result is that you may sign a contract promising more than your insurer has agreed to pay. If a claim falls into that gap, the shortfall may come from your business.
Courts may read policy wording more broadly than insurers argue. In Sydney Trains v Argo Syndicate AMA 1200 [2024] NSWCA 101, a commuter was injured after slipping on station tiles installed by a contractor. Sydney Trains paid damages and then sought to recover from the deregistered contractor’s public liability insurer. The insurer argued the policy only covered negligence, not breach of contract. The NSW Court of Appeal found the policy did respond, because the liability was connected with the injury to the commuter. The outcome turned on the specific policy wording, which is why it is risky to assume any two policies will behave the same way.
The case also shows that a claimant may be able to pursue an insurer directly when the insured business has been deregistered or is insolvent. Sydney Trains relied on section 601AG of the Corporations Act 2001 (Cth), which can allow recovery from the insurer of a deregistered company. In NSW, the Civil Liability (Third Party Claims Against Insurers) Act 2017 allows a claimant, with the court’s leave, to bring proceedings directly against the insurer.
When we review these clauses for clients, the changes we most commonly ask for are:
- Proportionate indemnity: Limiting the indemnity to the extent the loss was caused by your negligence or breach, so you are not covering the other party’s own fault.
- Excluding indirect loss: Removing liability for consequential losses such as the other party’s lost profits.
- Linking the indemnity to your insurance: Where the other party agrees, capping your liability at the amount recoverable under the policy the contract requires you to hold.
- Making it mutual: Asking the other party to give a matching indemnity for losses it causes.
Not every counterparty will agree to these changes, particularly larger head contractors and national landlords. Even partial changes may meaningfully reduce the gap between what you promise and what your insurer pays.
Public liability vs professional indemnity insurance
The two are often confused. As a general guide:
Public liability | Professional indemnity | |
Typical claim | Physical injury or property damage | Financial loss from advice or services |
Example | A visitor trips over a cable in your office | A client loses money relying on your advice |
Usual basis | Occurrence | Claims made |
Commonly held by | Trades, retail, hospitality, event operators | Consultants, architects, engineers, accountants |
Many businesses that provide advice and also have contact with the public may need both. Our article on professional indemnity insurance covers this in more detail.
How the risk differs by industry
- Construction and trades: Head contracts and subcontracts commonly require $10 million to $20 million of cover, and may require the head contractor or principal to be noted on the policy. These contracts also tend to carry the broadest indemnities, so the contract gap above is especially relevant. See our building and construction lawyer page.
- Retail and hospitality: Slip-and-fall claims are a common source of claims. Leases often require the tenant to insure the premises it occupies and may require the tenant to release the landlord from certain claims. See our commercial lease lawyer page.
- Labour hire: A worker placed with a host business is not the host’s employee, so the host’s workers’ compensation policy may not respond to their injury. Some public liability policies limit or exclude claims by labour hire workers, which is worth confirming with your broker.
- Professional services: Public liability cover is unlikely to respond to a claim that your advice or work fell below the expected standard. Professional indemnity cover is generally the relevant policy.
How to check your policy actually fits
A broker can help you find suitable cover. Before you sign a contract or lease that relies on it, it may also help to check:
- Read the contract’s insurance and indemnity clauses together: Note the minimum cover, who must be named on the policy and how broad the indemnity is.
- Compare the indemnity to the policy exclusions: Look in particular at the contractual liability exclusion and whether the insurer covers liability assumed under contract.
- Check the limit applies the way the contract expects: Some contracts require the limit “per occurrence” rather than “in the aggregate”, which can be a material difference.
- Confirm the activities and locations: The policy should describe what your business actually does and where it operates, including interstate work.
- Disclose accurately when applying or renewing: Incorrect or incomplete information may allow an insurer to reduce or refuse a claim.
- Negotiate the contract where needed: It is often easier to narrow an indemnity before signing than to find extra insurance afterwards.
Next steps
If you have been asked to hold public liability insurance under a lease, subcontract or supply agreement, it may be worth having the insurance and indemnity clauses reviewed alongside your policy before you sign.
Our contract lawyers can review the documents and explain where your cover and your contractual obligations may not line up. Contact us on 1300 003 077.
Frequently Asked Questions
Is public liability insurance mandatory in Australia?
There is no general law requiring every business to hold it. It may be required as a condition of some trade licences, and it is commonly required under commercial leases, construction contracts and council permits.
How much public liability cover do I need?
$5 million, $10 million and $20 million are common limits. The right amount usually depends on what your contracts and lease require and the size of a realistic claim in your industry. Your contracts are often the best starting point.
Does public liability insurance cover legal fees?
Most policies cover the cost of defending a claim the policy covers, subject to the policy terms and limits. Legal costs for an excluded claim, such as an employee injury or a professional advice claim, are unlikely to be covered.
Does public liability insurance cover injuries to my employees?
Generally no. Employee injuries are usually dealt with under your state or territory workers’ compensation scheme.
Will my policy cover an indemnity I give in a contract?
It depends on the policy wording. Many policies exclude liability you would only have because of the contract. If an indemnity goes beyond what you would be liable for at law, there may be a gap between what you have promised and what your insurer will pay.
What affects the cost of public liability insurance?
Premiums are commonly influenced by your industry, the activities you carry out, your turnover, the limit of cover, where you operate and your claims history.
What should I do if someone makes a public liability claim against my business?
It is generally best to notify your insurer promptly and avoid admitting liability or agreeing to pay anything before speaking with them. Late notification or an admission made without the insurer’s consent may affect your cover.
Last updated: October 2026.
About the Author
Farrah Motley
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