There are many financial risks that come with running a business, which is why you need business insurance to protect you when the unexpected happens.
Liability insurance is one type of business insurance cover that is worth considering, as it protects the business owner when property damage or personal injury has occurred during the running of business operations.
Liability insurance protects you against financial loss if your actions or your negligence is found to cause a person to be injured or killed, or a persons’ property to be damaged or destroyed.
Liability insurance products are most commonly taken out by businesses for risks involved in day-to-day business activities, but they are also built into many property insurance policies, for example, liability cover in home and contents insurance.
What Are The Types Of Liability Insurance?
There are three forms of liability insurance: public liability, professional indemnity and product liability.
• Public Liability
Public liability insurance covers a person, a business, an event, a contractor – even a community building – for costs from legal action if they are found liable for death or injury, loss or damage of property, or economic loss, resulting from their negligence.
• Professional Indemnity
This is a type of liability insurance however it’s not covered within general liability insurance policies.
Professional indemnity insurance is designed for businesses that provide advice or specialist services to customers and provides cover for claims by customers claiming that your professional services or advice caused them financial loss.
• Product Liability
If you manufacture, sell or distribute products or import products into Australia, you should have product liability insurance. This type of business insurance covers you for damage or injury that you might cause to another business or person by your product or service.
Product liability insurance is an important insurance to have because people who believe they have been injured by your product can take action against you as a manufacturer or importer. In many cases, this action can be taken without the person who sues you having to prove you were negligent or had any intention to cause harm.
What Are The Risks Of Liability Insurance?
Liability insurance covers two key financial risks. One is the legal costs of defending a claim.
The second is the compensation that you may be directed to pay to the injured or wronged party, plus their legal costs if a claim against you is upheld.
These usually include an excess to be paid by the policyholder in the event of a claim, and generally set a limit on the total amount payable under the policy, as well as a per-claim limit.
Public Liability Claims Examples
In business if you or one of your employees accidentally damages someone’s property or even someone else, public liability insurance can protect you. Here are some examples of public liability claims:
- A mechanic who makes house calls works on the brakes of a customer’s truck. As he tests the brakes, he drives into the back of the customer’s garage. The mechanic is responsible for the repairs. If the mechanic has an insurance policy, he can make a public liability claim for this.
- A lawyer based in an office suite has a window air conditioner. It falls from the window due to improper installation. The shop below has an expensive commercial awning, and the unit rips through the awning. The lawyer is responsible for the property damage.
- A horse trainer works on a five-acre plot connected to a neighbouring orchard. A horse breaks free and tramples a full acre of newly planted seedlings. The trainer is responsible for the seedlings.
- A customer trips on a loose brick in a walkway. Injuries caused due to uneven sidewalks, driveways, paths, steps or stairs on your business premises are claimable.
- Injuries due to slipping, tripping or falling within your business premises or on public grounds (restrooms, gardens, cafeterias) are claimable.
- Injuries from falling objects that occur on your property are claimable. Even non-customers who walk by your property could open a public liability claim. A member of the general public who walks by a construction site and is hit by a falling hammer, for example, can open a claim against the construction company.
Frequently Asked Questions
Public liability insurance protects businesses from the costs associated with claims made against them by members of the public for accidental physical injury, property damage or financial loss caused by their services or products. In some cases, public liability insurance also covers legal defence costs and any awards made in a court case.
Examples of public liability claims include:
- An explosion at a construction site which causes property damage to neighbouring premises
- A customer slipping on a wet floor at a business premises
- Damaged goods delivered by a business or contractor
- Defective product causing injury
- Failure to meet professional standards
It’s important to have adequate public liability coverage as even relatively minor incidents can result in significant legal fees and compensation costs which could have major financial implications for your business should you not have sufficient cover in place.
By taking out an appropriate policy, you will be able to protect yourself and your company from any potential risks and liabilities that may arise in the future.
Speak to Phoenix Insurance Brokers to arrange cover for your public liability or review your current level of insurance.