Public liability insurance covers your legal liability to pay compensation to third parties. You become legally liable to pay compensation to someone if something you have done or have failed to do results in them suffering a loss.
Unlike employer’s liability insurance, public liability insurance isn’t a legal requirement. However, because compensation claims are complicated and expensive to settle, it would be unwise for any business to operate without having public liability insurance to cover them.
What does public liability insurance cover?
Public liability insurance covers compensation awards that you are legally liability to pay to a member of the public who has been injured or who has had their property damaged. In addition to the compensation award, it also covers the legal costs and associated expenses that are incurred to deal with the claim against you.
Importantly, your public liability insurer will also have a team that has been trained in dealing with compensation claims. They will be able to handle the claim on your behalf which means that you won’t need to deal with solicitors and complex legal arguments and can spend your time on your business instead.
A minor injury such as bruising or light skin grazing will result in a compensation award of around £250-£500. However, once the legal costs and other expenses have been factored in, that claim is likely to end up costing in the region of £1,000.
More serious injuries such as broken bones will cost considerably more to settle. The compensation awarded for a broken wrist, for instance, will be higher, but will also include an element for the loss of wages and associated expenses that the claimant has incurred. Again, the legal costs will have to be factored in.
Severe injuries such as spinal injuries and other injuries where the claimant will not recover are extremely expensive to settle. As well as the compensation award, loss of wages, legal expenses and other associated costs, there could also be costs incurred to adapt the claimant’s home or vehicle to reflect their disability. Such claims often result in a total cost exceeding £250,000.
Financial loss cover
Most standard public liability insurance policies only cover compensation claims that involve an injury or property damage. They don’t cover compensation claims for purely economic losses.
This is a problem because you can be found legally liable to pay compensation to people even when they have not been injured or had their property damage. Such compensation claims would not be covered.
A financial loss cover extension plugs this gap in the cover and ensures that you are properly protected.
Treatment risk/medical malpractice cover
A standard public liability insurance policy will exclude claims arising from professional activities. This isn’t a problem for many trades, but for trades that are considered a profession such as hairdressers and beauticians, it creates a problem because it can leave them uninsured.
The treatment risk and medical malpractice cover extensions are slightly different, but they both address this issue by extending the public liability insurance cover so that it covers compensation claims arising out of professional activities.
The main difference between the two is the fact that whereas treatment risk cover is usually an extension to the public liability insurance policy, malpractice cover is usually a standalone product.
This is important because standard public liability insurance policies cover claims arising from things that you have done or failed to do during the insurance period even if the claim does not get made against you until later.
Malpractice cover usually covers claims made against you during the insurance period, even if they arise from things that you did or failed to do earlier. As such, it’s important to make sure that if you have malpractice cover, it covers you for things that you have done before the cover commenced. You should also remember that even when you cease trading, a claim could still be made against you so you may need to continue buying the cover.