One of the more common questions we get asked relates to a key component of any business insurance, and it is the question: What is Public Liability Insurance and what does it cover? Public Liability sits with the more commonly known Fire and Property Insurance, as the most important of all insurances for a business. It is present within almost all regular insurance policies – your home and contents, motor vehicle and of course business insurance. Lets have a look at it shall we.
So What is Public Liability Insurance ?
Lets start by defining it, in a Business Pack sense.
The Insuring Clause reads as:
We agree to pay to You or on Your behalf – all amounts which You shall become legally liable to pay as Compensation – in respect of Personal Injury and/or Property Damage – happening during the Period of Insurance – within the Geographical Limits – and caused by or arising out of an Occurrence in connection with the Business.
Lets break it down
- We agree to pay to You or on Your behalf
You means you and your company, including its employees actions. Agree to pay includes defence costs and litigation and fines.
- Personal Injury and Property Damage
If you injure someone by your actions or your product, if you damage something tangible or physical. It is not generally a financial damage only cover, this is a separate Financial Lines coverage.
- Period of Insurance
The period in your schedule, generally 12 month periods.
- Geographical Limitations
The Commonwealth of Australia and its external territories. It also includes Elsewhere in the World, but only with respect to overseas business visits or products supplied from the Commonwealth of Australia. North America is a tricky situation, consult a broker!
- An Occurrence in connection with your business
An event, including continuous or repeated exposure, which results in Personal Injury or Property Damage, that is neither expected nor intended.
Public Liability is sometimes referred to as Broadform Liability in Business Insurance Packages – this is simply combined public and products liability. The two are covered under the same policy, regardless of whether you have products or not. It is extremely rare to find just public liability, without products liability also included.
A key concept of any coverage, is the duty to defend the insured and settle reasonable claims. The duty to defend is of the utmost importance as it is where initial costs originate in a claim. Even frivolous claims must be responded to, and if the claim appears to be in any way to be valid, your insurance company will most likely elect to settle with the claimant rather than go to court. The settlement and handling of the claim is left in the hands of the Insurance Company – this is why you pay your premium!
It is not a total requirement of all businesses that they have Public Liability Insurance – unless they are operate a business where a license is required and/or an industry authority requires it. It is however becoming more and more common that clients, customers, landlords, councils, or those you perform work for, will want to site your public liability cover. Assuming you might get by without it is becoming increasingly rare – it is almost impossible to operate a business without having the coverage – not to mention its importance! Current sum insured coverage is generally $10,000,000, with $20,000,00o likely to be the standard norm in the next few years. Larger businesses are almost all required to hold $20,000,000 or higher. The general limit increases every few years, and it will not be long before insurance companies offer $50,000,000 as the normal limit.
So Do Business Owners Always Need Public Liability ?
Yes indeed, more than you can imagine. Quite simply, if you run a business, the very first thing you should have is public liability insurance. Any business that operates, across any industry, is exposed to actions being brought against them by a customer or prospective customer. Your exposure is present whether your customers come to you or you go to them, whether your sell products or not. Things happen and people get hurt, property gets damaged, more often than anyone can imagine. Implementing procedures and safety controls is an excellent idea, but can in no way override accidents or claims bought by any party.
Case Example – Bob’s Butcher Store
- Customers park their cars in Bob’s parking lot.
- Customers enter the store, they might slip or trip.
- Customers purchase items, Bob’s meat might poison them.
- Bob does home delivery, he might damage their home.
- Bob has employees, they might mess up in many ways.
- Bob leases his premises, and somehow causes the shopping centre to burn down by leaving the oven on.
- Bob stretches the truth in his advertising, he isn’t Australian Standard compliant.
- etc etc etc….just a little Butcher shop….so many potential risks.
Anything can happen across all facets of the business, and anyone at any time, can make a claim against Bob for some form of illness, injury or damage. Does Bob want to spend $10,000’s on legal fees defending himself or paying out for the damage he has caused?
No. Let the insurance company handle that!
What is Not Covered
As with any insurance policy, not everything can be insured or is appropriate for the policy in question, so there are always exclusions. As broad and all encompassing as it is, Business Pack Liability or a standalone liability policy does have exclusions…shock horror! Understanding what is public liability insurance, is just as important as understanding what it is not. Some of the below exclusions are either not insurable, or are available as a separate policy.
A Common List of Exclusions
- Property owned by You
- Property in Your care, custody or control
- Vehicles (Motor Vehicle Policy)
- Aircraft, Hovercraft or Watercraft (Specialist Policys)
- Aircraft Products
- Damage to Products
- Faulty Workmanship
- Loss of Use
- Product Guarantee
- Product Recall
- Advertising Injury
- Breach of Professional Duty
- Design, Specification and Formula
- Contractual Liability
- Employers Liability – (Workers Compensation)
- Fines, Penalties, Punitive, Exemplary or Damages
- Information Technology, Computer Data, Program & Media
- Libel and Slander
- Liquidated Damages
- War and Nuclear Risks
Many of these can be covered under a separate specialist policy, such as Vehicles, Aircraft, Watercraft, Product Recall, Professional Indemnity, Employers Liability (Workers Compensation), and Information Technology. Please ask your Statewide account executive for further information on what can and cant be obtained in regards to Public Liability for your business. And yes…you need it!!