Public liability insurance covers claims a member of public might bring against you for any damage you have caused to himself or to his property. Such claims can arise whether the claimant is a customer of yours or not.

Here are some examples of these types of claims:

• An old lady trips over the doormat on the way into your shop and breaks her leg. She makes a personal injury claim.
• Your delivery driver reverses into the industrial unit next to yours, making a dent in their roller door. The business sues you for damage to the door.
• Your dry cleaning company ruins a customer’s wedding dress. She sues for the damage.

Claims are increasing due to the growing “compensation culture” in the UK. This could be due to the prevalence of no win, no fee deals offered by lawyers for these kinds of legal actions. Such deals mean that the claimant has little or nothing to lose in the way of legal costs.

The potential damages for a claim can run to hundreds of thousands of pounds. It is no defence to say that you cannot afford to pay the claim – an uninsured business could go under due to a claim. Not only are the amounts of compensation high, but if you lose such a claim, you would be obliged to pay the claimant’s legal costs, which may run to tens of thousands of pounds in themselves.

Perhaps surprisingly, public liability insurance is not compulsory, but should be a priority for any business. A successful large claim against a firm could threaten its survival. Also, not having public liability cover or being underinsured could mean losing orders. It is common practice when purchasers invite tenders for work to ask to see evidence of adequate public liability insurance.

What will it cost?
Public liability premiums depend on the type of business you are carrying out. For example, pharmaceuticals and businesses using dangerous chemicals carry higher risks than most, so would be charged more than a less risky occupation like running a café. Also, the premium you are charged may be linked to your business’s turnover.

What will it look like?
In addition to the schedule which details what is covered and what is not, your public liability insurance policy may have conditions attached to it relating to the way you carry on your business. For example, the insurer may examine and prescribe your risk management procedure, and expect a warranty from you to train your staff to adhere to it. The policy might also contain excesses.

Tags | Public Liability Insurance