Public liability insurance covers you if a member of the public suffers injury, death or damage to their property whilst on your premises or as a result of you or your employees failing to take reasonable care whilst carrying out your business activities. It’s one of a number of types of insurance that businesses should consider taking out.
What does public liability insurance cover?
This type of insurance is particularly important if members of the public (including customers, suppliers or other individuals) frequently visit your premises or if you or your employees have direct contact with them whilst at work. Passers-by too may make a claim if they are injured or their property or possessions are damaged as a result of your business activities.
Public liability claims against your business can be made by members of the public as a result of an accident at:
- your business premises;
- your home if you operate your business from there;
- a customer’s home or their place of work; or
- an off-site event or activity organised by your business.
The insurance will cover your business for a claim for compensation for any loss, injury or death to members of the public for which your business is found to be responsible. This can include:
- their loss of earnings;
- the cost of correcting any damage to, or replacing broken, property;
- their medical fees for injuries; and
- your and the claimant’s legal expenses.
The total amount payable by the insurer will be limited to an amount set under the policy so any claim in excess of this will need to be paid by you or your business.
Public liability insurance does not cover your business for any death, injury or loss to your employees. This is instead covered by employers’ liability insurance.
Examples where public liability claims may arise
Compensation claims for trips, slips and falls are the most common but there are other events that can lead to such claims. The following are examples of events that can give rise to public liability claims against your business:
- you leave a box lying on the floor in your shop which a customer trips over, causing an injury;
- your employee spills a drink in a café and a customer slips over on this, causing an injury;
- a supplier falls down some stairs in your factory as the handrail is broken, causing an injury;
- whilst carrying out some carpentry repairs at a client’s office you leave a plane on the floor that an employee of the other firm trips over, causing injury, leading to a claim against you;
- tiles come off a roof your firm is repairing causing death to a passer-by where sufficient care had not been taken by your employees to secure them;
- you knock over a valuable antique when carrying in a carpet you are fitting at a customer’s home;
- you incorrectly wire the electrics in a customer’s home causing a fire; or
- a customer falls ill with food poisoning after eating food at your restaurant that had not been properly stored.
Where you employ someone to carry out work for you at your business premises you should ask to see their insurance schedule and documentation before taking them on in case they cause damage to your business premises or your employees.
Is public liability insurance compulsory?
No, public liability insurance is not compulsory unless you own a horse riding establishment and hire the horses out for riding or provide riding lessons, as required under the Riding Establishments Act 1964 (as amended by the Riding Establishments Act 1970). For more information on the specific requirements for public liability insurance in this area you should contact your local authority.
Even for other businesses, however, some customers or clients may require you to present proof of public liability insurance before they work with you. This is particularly common when working with local authorities or other government bodies. Local authorities often require a minimum of £5 million public liability cover if you want to put in a tender to work on their projects.
Level of public liability insurance cover
The level of cover required can be difficult to decide upon but insurance brokers or insurers can help with this. It will depend on:
- the nature of your business;
- the risks of your business premises and operations posed to members of the public;
- the size or turnover of your business;
- the type of customers;
- the number of people you employ; and
- your insurance claims history
These factors will also have an impact on the cost of the insurance.
To help reduce the likelihood of a claim and hence keep the cost low you should carry out appropriate and regular risk assessments. Insurers may, as part of the terms of your policy, require you to complete appropriate and regular risk assessments and put in place suitable controls where necessary to reduce the chance that accidents to third parties will happen. This is already required for health and safety purposes – for more details take a look at our health and safety article. The Health & Safety Executive’s website has information on how to carry out a risk assessment.
Even when a business does everything right there is always the chance of an accident happening that causes injury or loss to customers, visitors or others. Should such an accident happen for which your business is responsible the costs arising could be significant. Indeed, if your business is unable to meet the costs it could also give you a bad name and make it harder for you to find future new business.
So the question you should really be asking is: ‘Can I afford not to have public liability insurance?’.