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What is public liability insurance and who needs it?

If you run a business, you almost certainly need public liability insurance. When your business interacts with customers or the general public, your business can be sued if there is an injury to a person or damage to a person’s property due to your negligence. Even if your business is not found negligent, the legal costs to defend your business can be quite expensive. Also, it is very easy to be negligent as it only takes a customer slipping on a wet floor of your café or you putting your foot through a customer’s roof by accident to be found negligent. Public liability insurance protects businesses from the financial consequences of third-party claims of bodily injury or property damage and includes legal costs. Most public liability insurance policies also include product liability insurance, which is important if your business manufactures, sells, installs or distributes products.

Here is the breakdown of public liability insurance:

1. Personal injury suffered by a third party (e.g. a customer, supplier or member of the general public)
Accidents can and do happen every day and they usually happen so quickly you don’t have time to react. If a customer, supplier or member of the general public accidentally dies or becomes seriously injured and your business is proven negligent, compensation payouts can run into the hundreds of thousands or even millions of dollars. This is why most public liability insurance policies cover a liability limit of either 5, 10 or 20 million dollars. The types of compensation that can be sought are medical costs, loss of income, pain and suffering, emotional distress, or even wrongful death. Examples include a customer tripping over a box in a retail store, a customer tripping over a loose tile in a restaurant and a hammer falling on the head of someone walking off the street into a building site.

2. Damage to property owned by a third party
Even if you are very careful there’s always the chance that accidental damage can happen to a customer’s property. For example, a burst water pipe after work has been done by a plumber can cause extensive damage to property. If damage is done to commercial property a lawsuit can be raised not just for replacement on repair of the property, but also for economic loss as a result of the damage.

3. Legal and defence costs
The legal costs to defend your business against a public liability case can quickly add up, especially if the case continues over a lengthy period of time. Public liability insurance policies cover these legal costs, which may need to be covered even if your business was found not negligent.

4. Product liability insurance

Management Liability insurance is designed to provide protection to both the business and its directors or officers for claims of wrongful acts in the management of the business.

A business insurance pack can provide cover for your business premises and contents, against loss, damage, theft or financial loss from an insured interruption to the business.

Purchase up to six products under one Business Insurance Package. 

4. Product liability insurance
Product liability covers your business for the manufacturing or supply of parts or materials, even in the form of services or repairs, that fail and cause damage, injury, or death. Manufacturing businesses are particularly exposed to product liability claims due to design defects or manufacturing defects resulting in defective products causing personal injury or property damage. However, product liability insurance is also important cover for services businesses, such as a plumber installing a faulty water valve leaks causing extensive water damage.

5. Exclusion, endorsements, clauses and policy wordings
Public and product liability insurance policies have various exclusions, endorsements and clauses that tend to be tailored to particular industries and may or may not be important for your business. This is why it is important that an insurance broker tailors a policy to suit the needs of your business.

General Advice Warning: This advice is general and does not take into account your objectives, financial situation or needs. You should consider whether the advice is appropriate for you and your personal circumstances. Before you make any decision about whether to acquire a certain product, you should obtain and read the relevant product disclosure statement.

All information above has been provided by the author.


Craig Muldoon, Stress Free Insurance, ABN 68655178377, AFSL Community Broker Network

This article originally appeared on Stress Free Insurance Blog and has been published here with permission.

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