What’s the difference between Public Liability and legal liability?

Liability can be a confusing term for small business owners. You’ve probably heard of Public Liability insurance, but what about Legal Liability?

They sound like they’re the same thing, yet they’re completely different. Public Liability insurance covers accidents that cause injury or property damage to others. Legal Liability, on the other hand, is a legal responsibility. It’s something you may be held accountable for if your business’s actions (or lack of action) cause harm.

Understanding insurance terms can help you make smarter decisions about protecting your business. When you know how liability works and what insurance can (and can’t) do for you, you’re better equipped to choose the right cover and avoid expensive surprises down the road.

What is Public Liability insurance?

Public Liability insurance is designed to protect your business if someone is injured or their property is damaged as a result of your business activities. It can help cover the legal fees and compensation costs that come from third-party claims against your business.

Imagine a customer tripping over a cord in your salon, or accidentally spilling coffee on a client’s equipment while visiting their office. These simple mishaps can quickly turn into expensive claims, especially when medical or repair bills are involved. Public Liability insurance can help reduce that risk by covering unexpected incidents that could otherwise drain your savings or disrupt your operations.

What is Legal Liability?

Legal Liability is the legal responsibility your business has if your actions, or failure to act, cause harm to another person or their property. It’s part of doing business, whether you’re serving customers face to face or providing a service from home.

This can arise through negligence or a breach of duty of care. For example, if a café owner forgets to display a “wet floor” sign and a customer slips, or a tradesperson accidentally damages a client’s property. Those incidents could lead to legal liability.

It’s important to understand that legal liability isn’t a type of insurance policy. It’s the potential consequence of everyday business risks. That’s why many small businesses choose to protect themselves with insurance that helps cover these liabilities if they ever arise.

Common misconceptions about liability

It’s easy to assume that having Public Liability insurance means you’re covered for every possible legal risk. But that’s not quite true. Public Liability protects you when someone outside your business is injured or their property is damaged due to your business activities. But it doesn’t cover every kind of liability you might face. Issues like employee claims, claims of negligence, or cyber incidents may require additional cover such as Workers’ Compensation, Professional Indemnity, or Cyber Liability.

Another point of confusion is the idea that Legal Liability is a policy. It isn’t. Legal Liability is your legal obligation to pay for damage or injury if you’re found at fault. Your Public Liability policy may help cover those costs, but only for certain types of incidents.

That’s why it’s worth taking a few minutes to read through your policy wording or speak to your insurer. Understanding what’s covered in your business insurance can help you spot cover gaps before they become costly problems.

Know your liability. Protect your business

Even the most careful business owners can’t predict every accident or oversight. A single slip, spill, or mistake could lead to a claim that disrupts your day-to-day operations. A good time to get protected is before you need it.

Whether you work from home, on-site, or on the road, Public Liability insurance can help shield your business from costly accidents and claims. Visit BizCover to compare Public Liability quotes from leading Australian insurers. It’s fast, affordable, and completely drama free.

This information is general only and does not take into account your objectives, financial situation or needs. It should not be relied upon as advice. As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the Product Disclosure Statement or policy wording. Target Market Determination can also be found on our website as well. © 2025 BizCover Pty Limited, all rights reserved. ABN 68 127 707 975; AFSL 501769