No matter how safely you conduct your business, accidents can and do happen. If your business interacts with members of the public—for example, if you run a restaurant or plumbing business—you face a number of risks if a customer or client is injured or if, in the course of your work, you damage someone else’s property. Even minor damage or injury could lead to costly lawsuits that could put your business in jeopardy. Public Liability Insurance (PLI) can help protect you financially from lawsuits of this nature.

What is Public Liability Insurance?

Public Liability Insurance protects your company against third-party bodily injury and property damage claims and lawsuits filed by members of the public. It’s one of the most common insurance policies for businesses to carry, and any business that interacts with members of the public should consider purchasing it. While PLI is more common in the United Kingdom and Australia, the protections this insurance type offers are commonly found in the U.S. under general liability insurance.

There are many scenarios in which your business could be at risk of public claims. Accidents can easily happen in the course of your business operations, whether it’s a slip-and-fall situation at your office involving a customer or one of your employees inadvertently damaging someone else’s property while carrying out their work duties.

Public Liability Insurance is a vital component of general liability insurance, which covers a broader range of liabilities for a higher premium. For small businesses that don’t need all the coverages included in general liability insurance, purchasing a standalone Public Liability Insurance policy may be a great option.

Who needs Public Liability Insurance?

Companies that have frequent interactions with the general public are prime candidates for Public Liability Insurance. This might include shops and restaurants that see plenty of foot traffic, tradespeople who go into their customers’ homes, entertainers who work in public, or professional services companies that host clients at their offices or visit their clients at home. Many of the potential liabilities may arise from contact with customers—but any member of the public or any property of others that you come into contact with in the course of your business operations can be a risk factor.

Examples:

• A customer at your clothing store slips on a wet floor while shopping.
• You own a flooring business and while you are working in a customer’s home, one of your employees knocks over a valuable antique ornament.
• Your band is playing at a local concert hall and one of your roadies drops a heavy speaker onto the stage, damaging the floor of the stage.
• A client is visiting your financial advisory firm for a scheduled meeting and accidentally trips on some loose carpet, injuring her hip.

Companies that have offices where customers or clients regularly visit and even home businesses that see foot traffic from the public will also benefit from Public Liability Insurance. If someone is injured while on the company’s premises or in the home office, the company may be liable for bodily injury.

What does Public Liability Insurance cover?

Public Liability Insurance can help your company pay the costs of settling claims or defending lawsuits that arise from two main types of damages:

• Bodily injury – Provides financial protection for your company from claims and lawsuits arising from injuries on your business property. If someone is injured on your company’s premises, they could file a bodily injury claim or sue your business for medical expenses, lost wages, and other damages.
• Property damage – Provides financial protection for your company from claims and lawsuits arising from damage to someone else’s property that your company has caused. For example, you might be a contractor who is installing carpet in a customer’s office when you knock over and damage a computer server.

What doesn’t Public Liability Insurance cover?

Public Liability Insurance can work together with other types of insurance to give you a broad range of coverage. As a standalone policy, there are various scenarios that Public Liability Insurance does not cover:

Injuries to the business owner or employees – Employee injuries are typically covered by workers’ compensation insurance which is required in most states for businesses that have employees. Public Liability Insurance covers bodily injuries your company has caused to members of the public.

• Example: Your office manager is stocking the supply room when she injures her back carrying a heavy box.

The company’s own business property – Your company will need commercial property insurance to cover damages to your own property. Public Liability Insurance covers damage your business has caused to the property of others.

• Example: One of your employees throws a cigarette into an office trash can, igniting a fire that damages the office.

Professional liability – Mistakes that you or your employees make while carrying out their professional duties that result in financial losses for clients are not covered. This is known as malpractice insurance for healthcare professionals and professional liability or errors and omissions insurance for other professionals such as attorneys, architects, accountants, financial advisors, and insurance brokers.

• Example: An employee at your tax preparation firm files the wrong paperwork for a client, resulting in IRS penalties against your client.

Defamation charges – Libel and slander are not covered by Public Liability Insurance, though they would be covered under a commercial general liability policy.

• Example: Your general contracting firm publishes an article that falsely claims that a competing firm has faced three lawsuits last year over poor workmanship.

What’s the difference between Public Liability Insurance and commercial general liability insurance?

Commercial general liability insurance covers a broad range of liabilities that a company might face in the course of their business operations, including:

• Bodily injury
• Property damage
• Product defects
• Personal and advertising injury (e.g. libel and slander)

The coverage provided by Public Liability Insurance is usually included in the language of a commercial general liability policy, though Public Liability Insurance can also be purchased as a standalone policy. Public Liability Insurance provides a minimum layer of liability coverage, focused on bodily injuries and third party property damage. It’s a starting point for insuring your business against liabilities and is much more common in the United Kingdom and Australia. Commercial general liability insurance is more commonly purchased in the U.S. and is much more comprehensive coverage that includes many more scenarios than Public Liability Insurance.

Public Claims

It’s important to note that Public Liability Insurance will only cover claims raised by members of the public, which includes customers and the general public, while commercial general liability also provides coverage for many scenarios involving employees, investors, and vendors.

• Example: An employee of the IT firm you retain for your law firm comes into your office to fix a malfunctioning switchboard. He trips over an errant power cord and needs treatment at a hospital for a broken bone. When he sues for medical expenses, your Public Liability Insurance will not cover it because he is a vendor and not considered a member of the public.

Legal Requirements and Contractual Obligations

Similar to general liability insurance, Public Liability Insurance is typically not required by law, though there are cases when it may be required, including when your business is applying for a business loan, seeking a permit to hold a public event on public property, and renting or leasing property.

Costs

Since commercial general liability provides more comprehensive coverage, it will generally have higher premiums. For many small and midsize businesses, commercial general liability might be out of reach because of the higher premiums, or it may provide unneeded coverage. These businesses may choose to opt for Public Liability Insurance instead to provide limited coverage for a lower price.

What determines the pricing for Public Liability Insurance?

Insurance companies will look mainly at the type of business you operate and the risks involved in running it. For example, a busy restaurant that sees customers coming in and out at all times will have a higher risk than an architect’s office that might see a few clients visiting every day. Businesses can also evolve and change over time, and your insurer will consider the introduction of new risks and make the appropriate adjustments.

Final Word

Public Liability Insurance is a minimum layer of liability coverage for your company against claims of bodily injury or property damage from the public. It’s especially important for companies that engage in frequent interactions with members of the public such as restaurants, shops, or tradespeople who go into their customers’ homes or offices. Compared to commercial general liability insurance, which provides a more comprehensive coverage for a wide variety of scenarios, Public Liability Insurance is a more limited option that is often more economical for small and midsize businesses that may not have the resources or need to purchase commercial general liability coverage. Public Liability Insurance serves as a starting point for businesses that want to insure against common liabilities.