Public Liability Insurance Explained
Public Liability insurance is 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 them being injured or sustaining property damage as a result of your negligent business activities.
Small business owners have a legal responsibility to take reasonable steps for the safety of their customers, suppliers and the community, and for their property.
Most Public Liability policies also extend to cover Product Liability. If you sell, supply or deliver goods, even in the form of repair or service, you may need cover for negligence claims against you where your product has caused injury, death or damage.
Even the most careful businesses run the risk of injuring someone or damaging something during the course of their operations.
Chances are like many other small businesses, if you were faced with a Public Liability claim, the financial impact of paying the claim and associated legal fees (including defence costs) could potentially send you out of business. That’s why you could consider Public Liability insurance to provide the financial protection your business deserves.
*As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording. The information contained on this web page is general only and should not be relied upon as advice.
What does Public Liability insurance typically cover?
Like most insurance policies, it is always important to check what you are covered for exactly. If you are ever unsure, refer to the Product Disclosure Statement (PDS) or chat with your insurer.
Personal injury suffered by a third party (e.g. a customer, supplier or member of the public)
If your business interacts with people on a regular basis, there is always going to be the chance of a potential claim occurring. Accidents can happen in the blink of an eye, from a client accidentally tripping over a box of stock in a retail store to a beauty professional using a product that causes a reaction to their client’s skin. No matter how unintentional, the impact of a claim can have a big impact on your business – a worry you can do without.
Damage to property owned by a third party due to your negligent business activities
This covers things like accidentally causing damage to your clients’ personal property, like spilling food and damaging their clothing, mobile phone, etc. It may also provide protection for professions like tradies where physical works are being done at a client’s property and things don’t go to plan, like accidentally bursting a pipe and causing damage.
Advertising injury
Public Liability insurance may also cover claims of advertising injury, such as unintentional copyright infringement, defamation, or misleading statements made in your business marketing. For example, if a competitor claims that your ad unfairly damages their reputation or uses similar branding, your policy may help cover the cost of legal defence and compensation. This protection can be valuable for businesses that promote themselves online or through printed materials.
Legal and defence costs associated with a covered claim
Covers your legal expenses which may be involved with your claim, which can quickly add up, especially if your claim goes on over a lengthy period of time.
**Many Public Liability policies also provide cover for product liability.
What does Public Liability insurance typically not cover?
- Personal injuries to you or your employees
- Damage to your own property
- Costs of rectifying faulty workmanship
- Professional negligence or unlawful activity
- Contractual liability
- Events occurring before or after the policy period
- Asbestos
- Advertising injury
- Pollution
- Reckless or wilful failure to take care
Do I really need Public Liability Insurance?
Public Liability insurance is one of the most common types of business cover. It helps protect your business against costly claims, but in some cases, it could also be a legal or contractual requirement.
Certain industries and occupations, like trades, may be required by law to have Public Liability insurance before starting work. For example, electricians in Queensland must hold Public Liability insurance to be licensed under the Electrical Safety Regulation 2013 (QLD). Even if you’re not legally obligated, some clients or councils may ask for proof of cover before signing a contract or issuing permits.
If your business rents a commercial space, landlords could make Public Liability insurance a condition of your lease. It’s worth checking what level of cover your business needs, as minimum requirements can vary depending on your profession or location. Having the right policy in place helps protect your finances and reputation if something goes wrong.
Recommended reading: Do I Need Public Liability Insurance?
What could a Public Liability claim result from?
These are some examples of situations where a Public Liability claim may occur.
- Injury to or death of third parties as a result of your negligent business activities
- Damage to a third party’s property as a result of your negligent business activities
- Financial loss directly caused as a result of your negligence
- Inappropriate installation of equipment causing damage to property
If your business interacts with members of the public, clients or suppliers in any capacity, then there is always a risk a claim may arise. Let’s take a look at some industry specific examples of when a claim may occur.
Tradies – Trade businesses have the potential to cause damage to property when carrying out works, like accidentally spilling paint all over the carpet. This is where cover for rectification of faulty workmanship can assist.
Retail and Hospitality – Working closely with both customers and suppliers means slips, trips and falls are risks that these types of businesses are faced with each day. When providing food services gets thrown into the mix, there is also a risk of claims for food poisoning to consider, something which the Product Liability section of your Public Liability policy could provide protection from.
Professionals – For many professionals, there are a variety of ways to interact with clients. Maybe you have a home office established where clients visit you, or you’re out visiting them at locations. Either way, Public Liability is still important to consider, especially if your client were to trip and injure themselves at your property or if you were to accidentally cause damage to their personal property.
Public Liability claims examples
Accidents can happen anywhere, anytime.
Graphic Design Business – NSW
A client visiting a graphic design business tripped over a dip in the floor while walking through a doorway, resulting in a hairline fracture and ligament damage to her left foot. She took legal action, seeking compensation for pain and suffering, medical expenses, and lost income. She claimed the dip was a known hazard the business failed to fix.
The Public Liability insurer stepped in, covering $75,000 in compensation plus $30,000 in defence costs. Without this cover, the business would have faced over $100,000 out of pocket.
Beautician
After receiving a full-face wax at the insured’s salon, a client developed burns that required medical treatment to avoid scarring. The client submitted a damages claim of $7,786.02. The insurer assessed the evidence and accepted the claim, issuing a full payout of $7,786.02.
Concreter
While working on-site, the insured erected a security fence but failed to secure it properly with zip ties. Strong winds knocked the fence over, damaging a third party’s vehicle. The vehicle owner issued a letter of demand for $6,045 to cover repair costs. After reviewing photos and documentation, the insurer confirmed liability under the Public Liability policy and paid out the claim in full.
The provision of the claims examples are for illustrative purposes only and should not be seen as an indication as to how any potential claim will be assessed or accepted. Coverage for claims on the policy will be determined by the insurer, not BizCover.
Frequently asked questions
Does Public Liability insurance cover my employees?
No. Public Liability insurance only covers claims made by third parties, such as clients or members of the public, not your employees. If one of your workers is injured or becomes ill while working, that would fall under Workers’ Compensation insurance.
Is Public Liability insurance compulsory in Australia?
Generally speaking, Public Liability insurance isn’t legally required for all businesses, but it may be mandatory for certain industries and occupations. For example, electricians in Queensland must hold it to maintain their licences. Certain clients and landlords may also require proof of Public Liability cover before work can begin.
Why do sole traders need Public Liability insurance?
Even if you work alone, accidents can still happen. As a sole trader, Public Liability insurance helps protect you if your actions cause injury or property damage to someone else. Without it, you might be personally responsible for covering legal costs and compensation, which could be devastating to your business and finances.
What is the difference between Public Liability insurance and Professional Indemnity Insurance?
Public Liability insurance covers third-party injury or property damage caused by your business activities, like a client tripping at your premises. On the other hand, Professional Indemnity insurance covers financial losses caused by mistakes, errors, or negligence in your professional advice or services. Professionals may carry both, as they protect against very different risks.
What’s the difference between Public Liability and General Liability?
Both terms refer to protection against third-party injury or property damage, but Public Liability is the standard term used in Australia. General Liability is more common in the United States, where it may include extra types of cover.
How much Public Liability should I obtain?
The right amount of Public Liability insurance depends on your business activities, contracts, and clients. Small business owners may choose cover between $5 million and $20 million if they purchase their policy through BizCover. Some industries or clients may specify a minimum level, so it’s important to check your industry or contract regulations.
How much does Public Liability insurance cost?
On average, small business owners pay around $39 per month for Public Liability insurance. However your premium will vary based on factors like your industry, business size, turnover, and level of cover. For example, a café owner may pay more than a home-based consultant because their risk exposure is higher.