Third parties can sue a business for personal injury or property damage. For this reason, public liability insurance is one of the most important types of business insurance if you have any dealings or interactions with third parties such as the public, vendors, customers, or passers-by.
If a third party is entangled in an accident, like an injury, then this policy would provide essential cover. Designed to protect against lawsuits and compensation claims, it can help your business operate as usual should you be sued.
But before taking out a public liability policy for your small business, it’s important to understand the situations that you could be covered for, as well as what you’re not covered for.
Being sued for personal injury
Public liability insurance can help your business if you’re sued for personal injury arising out of an accident due to work. This could be an employee or a product causing accidental injury to a third party.
For instance, a client visits an office and trips over some equipment that was left out, or slips on a wet floor. The third-party injures themself, blames the business, and sues for personal injury.
Injuries from a product you design or sell could also result in you being sued. For example, you resell builders’ hardware, however, due to a manufacturing defect the head of a hammer flies off and hits a customer. You’re blamed and then sued.
A resulting lawsuit could cost your business tens of thousands of pounds, or much more. Especially for small businesses, shelling out for expensive legal battles can put you at risk. It could even potentially put you out of business.
That’s where public liability insurance comes in. It can protect your small business if you’re sued for a personal injury relating to your work. This can provide invaluable peace of mind while ensuring the business can operate as usual.
What does public liability insurance cover?
Public liability insurance is all about coverage of accidents to third parties. Whether that’s a customer, client or anyone else in your supply chain, public liability can protect you if you’re sued as a result of personal injury or also property damage due to your work.
Product liability insurance in the UK is often wrapped up with public liability insurance too. This would cover injury or damage related to products you manufacture, design, supply, or sell. However, product liability isn’t always included, so make sure to check before you buy.
Common areas where product liability insurance can provide cover is for products that have a design or manufacturing defect, as well as a warning or labelling failure that has caused an unsafe product. As a result, if personal injury or property damage is caused and your business is sued, you could be covered.
You should consider both public and product liability if you’re a sole trader, partnership, limited company, or registered charity, who has any dealings with third parties.
Here are some examples where public and product liability insurance could provide cover:
- In a shop, a customer trips over some stock that an employee left out, injuring themself. The customer sues for injury.
- A carpentry business is installing furniture at a customer’s home and employees accidentally cause property damage. The customer sues and claims compensation.
- A market stall selling homemade pizzas is blamed for food poisoning when a customer becomes ill after eating the product.
- A dog toy has parts that break off easily when chewed, causing several dogs to become ill. The manufacturer is sued for the cost of vet bills.
There are some instances where liability insurance covers non-physical damages. This relates to the unintentional consequences of intentional actions. For example, wrongful arrest or wrongful eviction. However, be very careful as it depends on the policy wording.
Overall, public and product liability insurance covers the legal fees, compensation claims, medical bills, and repair costs amounting from a lawsuit. Together, they’re the most popular policies for small businesses and are typically part of a wider business insurance package.
What does public liability insurance not cover?
With every insurance policy there are going to be exclusions, and types of events that are not covered. Each insurance provider will have its terms and specific wording, but there are some common exclusions.
A keyword used throughout this is ‘accidental’. This means that any personal injury or damage caused intentionally by an employee is excluded from the policy’s coverage. It must strictly be accidentally caused.
Another key part of public liability insurance is that it’s all about third-party cover. This means it will only cover personal injuries caused to that third party, so it will not cover an employee who is injured or killed due to their work. For this, you would need employers’ liability insurance or personal accident insurance.
At the same time, it means you won’t be covered for damage against your business’ property or contents. Remember, it covers third parties only. You should look at commercial property insurance to ensure your business is covered against damage.