What is Public Liability Insurance?

Keeping your business a safe place for customers is no easy task. But accidents can still occur, and this is where Public Liability insurance can help to provide both cover and peace of mind.
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How does Public Liability insurance work?

If your business interacts with members of the public on a regular basis, then you might wish to consider Public Liability insurance.

Public Liability Insurance can help cover legal fees and compensation costs if a customer, member of the public or a supplier claims against your business for injury or damage to their property as a result of your alleged negligent business activity.

When might you use Public Liability Insurance?

A liability claim could be made against your business if it causes:

  • Injury or death of a third party
  • Loss or damage to a third party’s property
  • Emotional distress or mental anguish

In such cases, you may be able to use your Public Liability to help cover the associated legal costs.

However, this can vary depending on the lender. So it can be a good idea to check the terms and conditions of a policy before committing to anything – that way, you can find out when you’ll be covered.

What costs can a typical policy cover?

When making a claim on your Public Liability Insurance, some of the costs it might include:

  • Settlement costs

    The award or settlement you might end up paying to the third party for any damages.

  • Defence costs

    The costs associated with assessing and defending the claim, which can include the costs associated with legal representation and court proceedings.

  • Property costs

    Which may help cover the costs of replacing or repairing a third party’s property if it was lost or damaged as a result of alleged negligence.

  • Cover for employees

    This can happen if the claim is also made against an employee as they might have been involved in the incident or acting on your behalf.

  • Injuries on your premises

    This can include the costs of first aid. Typically, medical and hospital costs would be awarded as part of the settlement or compensation for damages.

Again, the specific costs that are covered can vary from lender to lender, with some policies covering just a few of these costs and others being broader. You should read the Product Disclosure Statement of any product you are considering before making any purchasing decision.

What is typically excluded?

As with all insurance policies, there are limits to what Public Liability can cover. Some exclusion may include:

  • Injury of workers

    These costs are usually covered by worker compensation insurance. As the Australian Fair Work Ombudsman notes, this insurance is required for employers in every Australian state and territory.

  • Claims involving asbestos

    Generally, most Public Liability policies will not cover asbestos exposure. Given the high risk and payouts associated with such claims, they usually require specialist liability policies instead.

  • Punitive damages

    This refers to any extra penalties you’ll pay if a court finds that you behaved in an exceedingly negligent fashion.

  • Illegal acts

    Public Liability Insurance won’t generally cover the costs or penalties resulting from any illegal activities, whether it’s from the business owner or their employees.

Claims made against you due to any professional advice or service you provided will generally not be covered by Public Liability Insurance either. Such claims are usually covered by Professional Indemnity insurance instead.

What businesses could benefit from Public Liability insurance?

Public Liability Insurance might be worth considering. For some occupations and businesses, it can even be mandatory. For example, plumbers in Victoria are required to have Public Liability insurance that covers them for at least $5 million as well as additional coverage required for defects liability, trade practices liability and completed work liability. This is a legal requirement set out as part of the Licensed Plumbers General Insurance Order 2002.

In other cases, it can be a condition of employment for contractors. However, these instances may have more to do with the employer’s preferences than your legal requirements.

It’s important to know your business requirements and obligations. What are the risks of not having it? One of the most obvious risk your business faces if you don’t have Public Liability insurance is the financial consequences.

If a customer is injured as a result of your business operations, they can take legal action against you. This could mean court fees, expensive lawyers and the possibility of paying a large settlement.

Public Liability insurance might help cover some of these costs. In this way, it might help you avoid a huge expense that your business has no way of paying.

How much is Public Liability insurance?

Public Liability insurance is usually paid on a regular basis. You may have the choice to pay this regular “premium” either monthly or yearly too.

A number of different factors will also go into deciding the price of your premium. These might be:

  • The level of cover

    A larger cover amount generally translates to higher premiums.

  • The size of your business

    The more employees your business hires and the income it earns, the higher the premiums could be. This is because a business takes on more work, there can be a greater tendency for accidents to happen.

  • The business industry and type

    Some industries and businesses are more prone to accidents and injuries than others. For instance, insurers could typically find a mining company to be riskier than a marketing firm.

  • Your claim history

    If you or your business have a history of insurance claims, this could suggest an increased level of risk to the insurer.

  • The business location

    Each Australian state and territory charges a different level of stamp duty tax on insurance premiums. This means that the location of your business (or its head office) could also affect the premiums.

Furthermore, the cost of a Public Liability policy can vary between lenders. So you may wish to compare different policies before deciding on one that’s suitable for your budget.

Where can I compare policies?

We can definitely help you compare Public Liability policies from a range of lenders*. iSelect has partnered with BizCover to help you find a suitable business insurance policy. You can click here to start comparing policies today!

Last updated: 15/03/2022