Legal Requirement for Public Liability Insurance

As a business, you will inevitably have interactions with customers and third parties that will pass through the premises or use a good or service you sell. From occupational health and safety to Australian Consumer Law, businesses are responsible for ensuring the safety of third parties that interact with the business. However, businesses cannot predict every injury or damage that might occur, or any product defects that might arise. In these instances, Public Liability insurance can offer protection against the costs associated with any claims brought against your business.

What is Public Liability insurance?

Despite our best efforts, sometimes accidents happen, a wet floor, loose cable, or tipped over paint bucket could turn into a costly legal nightmare if a third-party is injured, or their property is damaged. That’s where Public Liability insurance comes in, it’s designed to provide protection for you and your business in the event a customer, supplier or a member of the public brings a claim against you due to their being injured or sustaining property damage as a result of your negligent business activities.

What does Public Liability insurance cover?

Public Liability insurance can help small businesses owners to cover costs when things go wrong. The types of risks covered include:

• Personal Injury
  Compensation costs for personal injuries suffered by a third party, such as a customer, supplier or member of the public.
• Legal & Defence
  The legal and defence costs associated with a claim.
• Property Damage
  Compensation for damage to property owned by a third party due to your negligent business activities.
• Damage in Custody
  Compensation for damage of third-party goods not owned by you which are in your care, custody or control.

What is not covered under Public Liability insurance:

• Employee injuries
• Costs of rectifying faulty workmanship or product recall
• Contractual liability
• Aircraft products
• Liquidated damages
• Punitive damages (where the insured acted so badly that extra damages were awarded)
• Employee injuries
• Costs of rectifying faulty workmanship or product recall
• Contractual liability
• Aircraft products
• Liquidated damages
• Punitive damages (where the insured acted so badly that extra damages were awarded)

However, this is only a basic list as to what Public Liability insurance covers and a policy should be tailored to a business’ needs based on the risk areas identified in your business.

Legal Requirement for Public Liability Insurance

While there may be no statutory requirement, your business should consider being covered by Public Liability insurance in the following circumstances:

•  The general public can visit your premises (including delivery personnel and customers, even if you have a home-based business)
• You visit your customers spaces to work (such as their homes, or in public spaces)

While Public Liability insurance itself is not a legal requirement under Australian law, it may be required to obtain some industry licenses, and for some occupations it is not legal to work without a license. For example, Electricians operating in Queensland are required to have a minimum of $5million in Public Liability cover in order to acquire or renew professional licenses, and cannot operate if they do not have a current license.

Type and Level of Public Liability Insurance

As with other forms of insurance, the level of cover required varies dependent on the risk assessment of a business’ activities. Naturally, a business in a manual labour heavy industry is likely going to need greater protection than that of an office environment. Even as a small business, the products you sell and the facilities you maintain still carry a degree of risk and can benefit from the cover of a Public Liability policy of some nature.

Key Takeaways

Public Liability insurance can be a vital part of a business’ risk management policy. While not usually compulsory, the financial risks of not having Public Liability insurance can be significant, including potential for significant out of pocket expenses, expensive legal bills and reputational damage.

Author’s Bio

Anthony is a lawyer and Strategist at LegalVision. He has a keen interest in startup law, IT law and scaling fast-growing businesses. He has a strong understanding in how startups operate at all stages and navigating the myriad of legal issues surrounding online businesses. He has worked in the public and private legal sector, specialising in disputes and litigation, corporate advisory and tax controversy. If you have a question about a dispute or litigation matter, contact LegalVision on 1300 544 755.