Know Risk is a community education program designed by the Australian and New Zealand Institute of Insurance and Finance (ANZIIF) to improve our understanding of insurance and how it relates to managing the many risks we all face in life.
Public liability insurance for small business
Protection for everyone.
If you are a small business owner and/or a regular reader of our site, you will no doubt be aware that there are multiple insurance types that are relevant to, and often necessary for, your business.
One such insurance type is public liability insurance, which is designed to protect your business against any claims that may arise in relation to damage or injuries sustained by third parties (e.g. other people) and/or their property in the course of you carrying out your business activities.
What does that mean in practice, though? Well, let’s have a look!
In what situations would it be useful?
Public liability insurance is all about negligence — and protecting yourself against any claims alleging negligent behaviour by you, your business or your employees. Some scenarios that may arise as a result of negligence include:
- Damage to someone else’s (third-party) property
- Giving poor advice, possibly resulting in a loss of money
- Death or injury, including but not limited to emotional and psychological damage
While you might think that you would never intentionally damage someone’s property, provide poor advice or be an active participant in a situation that will give rise to death or injury, that doesn’t mean you won’t be found negligent in any of these scenarios. This is because an action is considered negligent if the harm it causes was reasonably foreseeable as opposed to intentional.
What is covered in a public liability policy?
Public liability policies are designed to provide you with the financial means to defend any claims made against you, as well as cover any compensation costs for which you may be deemed liable.
Most policies are built with the aim of providing coverage for the following:
- Loss or damage of goods
- Legal costs
- Damage or injury caused by your products or services
Of course, some policies will also cover additional items (like accidental pollution and first aid expenses), but the above three are pretty much considered standard in public liability policies.
What things aren’t covered?
Not everything is included in a public liability policy. The following things are generally excluded by most insurers:
- Anything relating to asbestos
- Things involving aircrafts
- Worker’s compensation
- Product recalls
- Punitive or liquidated damages — this is where your actions are deemed by a judge to have been so poor that you are ordered to pay extra damages
You should also bear in mind that public liability policies also have some limitations in terms of how much they will pay out — there is typically a limit to how much can be paid out per claim, as well as a limit on the total amount that can be paid out under a policy as a whole.
What kinds of businesses is it most relevant to?
There is an argument to be made that it’s difficult to find a business type where public liability insurance is completely irrelevant. However, there are certainly some business types that may carry a higher risk. If your business involves any of the following, you may find that public liability insurance is especially worth considering:
- Manufacturing and/or repairs
- Provision of advice and/or management of money
- Having to work in or visit areas that are not owned by your business
- Visitors to your work premises
- Essentially anything that involves having to interact or work with people who are not employed by you — i.e. customers
Is it available in business packs?
The answer is yes. While public liability policies can often be purchased as a stand-alone policy, depending on the insurer, pretty much every insurer who offers business pack policies will include public liability insurance as an optional cover. In fact, some insurers make public liability insurance a standard cover in their business packs.
How do I know if I need it?
If you’re not sure about whether or not public liability insurance is relevant to your business, it’s worthwhile you discussing any concerns and considerations with someone who has knowledge of both your business and business insurances in general. A broker or insurance professional are both great options.