Liability Insurance: What it Does and Doesn’t Cover
If you’ve visited business premises, you’ll probably be familiar with employers’ liability insurance. All businesses, small or large, are required to prominently display a certificate from their insurer that demonstrates that they have such a policy.
In a block of apartments managed by a property management company, this may be displayed near the concierge office and in a small mechanical garage, it could be displayed in the back office where payments are taken. You may have cast your eye over this certificate and wondered why the business felt the desire to frame it so proudly – now you know why.
Public liability insurance is a similar but crucially different insurance cover that is not mandatory. Nevertheless, businesses with premises tend to treat it as such as buy this in addition to their business insurance.
But what is public liability insurance? What does it cover and crucially, what doesn’t it cover?
What Is Public Liability Insurance?
Public liability insurance is defined as a policy that will provide funds to pay compensation to members of the public who suffer harm because of being on your business premises or interacting with employees as they carry out their business at your property or the customer’s property.
This is a wide-ranging policy that could protect a business against costly legal claims brought against it under several different pieces of legislation including The Occupiers Liability Act 1957, 1984 and case law under the tort of negligence.
Let’s consider a few examples to clearly explain why businesses see value in public liability insurance:
Imagine a customer of a restaurant falling down a flight of stairs when navigating their way back from the toilet. They could sue the restaurant for compensation because the lighting was too dim to see the steps and they have negligently allowed this dangerous situation to arise.
Consider also the case of a customer who suffers second-degree burns from hot coffee when after slipping on a wet floor in a fast-food restaurant. They could claim that the wet floor was not signposted or that the coffee cup did not have a secure lid to prevent spills.
Although these cases sound rare and infrequent, they represent a real threat to small and medium-sized firms up and down the country because negligence cases can be expensive. Damages for permanent disfigurement or loss of limbs or sight can easily exceed £100,000, and this doesn’t include the impact of the legal costs of defending such a claim.
What Is Covered By Public Liability Insurance?
When a member of the public brings a claim against your firm, seeking compensation for financial or emotional harm suffered, public liability insurance should cover:
- The cost of hiring a solicitor or barrister to correspond with the claimant/the claimant’s legal representation and/or represent you in court
- The cost of settling the case with the claimant out of court
- The cost of damages awarded by a court
- The cost of NHS medical treatment could be recharged to your business in some rare cases
Public liability insurance policies come with a maximum coverage value, such as £1m, £5m or £10m. This headline figure serves as the maximum payout possible under the policy. Your insurance broker should be able to advise on a sensible policy size based on the scale and nature of your business operations.
What Isn’t Covered By Public Liability Insurance?
- Claims arising from employees of your business (this is covered by employers’ liability insurance)
- A portion of each claim will still be payable by you, the policyholder. This is known as the ‘excess’ and this amount can be tailored depending on your preferences.
- Claims resulting from wilfully negligent or criminal acts are also unlikely to be covered by an insurance policy.