Understanding the Importance of Public Liability Insurance

Running a business is full of potential risks, no matter how careful its owner or owners might be. Any business can become liable for a range of claims and it is essential that both it and its employees are protected by public liability insurance. If they are not, it can be a very expensive business if something goes wrong.

There are three main areas covered by public liability insurance.

  • Bodily injury -depending on the type of business, premises can be dangerous places and there may be, in certain cases, a higher risk of someone being accidentally injured while on the company’s property. A business could therefore be sued for injury to a person, even if good health and safety procedures are in place. Those working out of a room at home should also seriously consider insurance. Although clients may not visit the premises there may be occasions when the business is being promoted, for example, at a conference or a trade fair, using a stand for publicity. Public liability insurance would cover the possibility of the stand collapsing on someone and injuring them, for example.
  • Property damage -the risk of damage to personal or business property can never be completely eliminated and public liability insurance can mitigate the financial effects such an incident. It could be something as simple as a cup of coffee being spilt on a computer keyboard or a ladder that is being carried smashing a window. While no one wants to cause an accident, they do happen and it is best to be protected against the financial consequences.
  • Personal injury -it is a sad fact that some businesses can go over the top when trying to gain an advantage over a competitor and though it may not be done deliberately, it might lead an organisation to be sued for libel or slander. The media can be especially vulnerable to this, which is why they employ lawyers to check on what appears in a newspaper or TV report.

Legal procedure

If a business has taken out public liability insurance through a broker, it should always look at the policy to see what it covers and what the exclusions are. Actions that are deliberate or intentional, such as an employee wilfully damaging some of business’s property or making a premeditated attack on another employee, will not be covered under such a policy.

In addition, punitive damages, which may be awarded if a business is taken to court for intentional or deliberate damage, will not be covered.

Should a business be taken to court and it is covered by public liability insurance, the insurance company provides a lawyer to defend the business and will pay all the legal fees and any other associated expenses. It will also cover any awards made by the court against the business, but only up to the limit of liability agreed in the policy.

Uninsured businesses can be at significant risk, especially if they employ contractors for whom they will be liable when working on their or their client’s premises. Many contractors choose to use an umbrella company, a specialist organisation that looks after a range of administrative tasks, such as insurance and payroll.

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