What Public Liability Insurance Does & Doesn’t Cover

Do you have public liability insurance? Your business faces many financial risks in the course of its operations, making it advisable to have this type of insurance to protect your business against an unexpected public liability claim.

First for Women firmly believe every business, small or large, needs this type of business insurance to stay profitable and alive. This article explains all about this type of insurance: what it is, how much of it you need, what it covers, and what it doesn’t cover. 

What is public liability insurance?

Public liability cover is a type of insurance that protects your business against third-party liability due to your business activities. Like all sorts of insurance cover, it may appear unnecessary until an unforeseen event, such as an injury to a customer or member of the public, occurs. At this point, the vital importance of Public Liability Insurance is abundantly clear!

A member of the public, who is injured accidentally while on your business premises could sue your business for damages. As a result, you could incur heavy legal costs to defend your business. Even if you can afford those fees, you might still be left with no money to run your daily operations, which could lead to the demise of your hard-earned business.

The crucial question to consider is this: “Does my business need public liability cover?” If your business interacts with members of the public, like customers or suppliers, in any way, the answer is an unqualified ‘yes.’

Although public liability cover isn’t mandatory in South Africa, there is the risk that a customer or supplier who visits your premises might be injured while on your property. Even though your business may have thorough supervision and good procedures, accidents can still happen.

It just makes sound sense to protect your business from such risks by adding public liability cover to your business insurance. If not, your business, especially if it’s a start-up or small business, might become one of the 70% to 80% that don’t see their fifth birthday[1].

How much public liability insurance do you need?

There’s no public liability cover that fits all types of businesses and scenarios. The risk profile of each business is different, making it hard to generalise how much public liability cover is enough. For example, a plumber faces risk at their customers’ homes while a retailer exposes customers to risk at their own store. The risk profiles of these two types of businesses are different.

However, a starting point is to try to evaluate how much compensation you’d be liable for. Factors to consider include the nature of the possible injury, possible consequences of the injury, the resultant loss of income and potential to earn income on the part of the injured party, and the medical costs incurred. 

It isn’t easy to estimate accurately how much public liability insurance your business needs, however, there’s no doubt that it could be very costly to operate a business without it. That’s why it’s a good idea to speak with a trained First for Women insurance broker to assist with determining the public liability cover that your business needs.

What does public liability insurance cover?

Like any insurance, public liability cover doesn’t cover every third-party insurance claim. You must be aware of what’s covered under your public liability policy. This type of insurance covers legal expenses and possible compensation relating to damage, loss, or injury to a third party incurred due to:

• People visiting your business premises

Most businesses interact with a variety of people such as customers, suppliers and salespeople soliciting business. Imagine an individual, such as a supplier, visiting your business premises to fulfil a delivery order. While visiting, they suffer a minor injury on the factory floor. The injured supplier could sue your business for the injuries suffered and for loss of income while they were unable to work. If you have public liability cover, you won’t have to worry about finding the funds to deal with this because you’ll be financially protected. 

However, if your business is found to be negligent of maintenance or following safety laws, your public liability claim may be rejected. 

• Events organised on your premises

A business that owns large premises might want to generate extra cash by renting out its premises. In some cases, the business may hold events related to their industry, which increases their business exposure to potential customers.

To prepare the premises to hold such events, temporary structures – such as advertising boards or a stage – might be required. If one of these structures collapses and injures people attending the event, your business could be held liable. Public liability insurance can come to your rescue in such a scenario.

• Damage to third-party property

There are numerous scenarios under which a business can be held legally accountable for its mistakes that lead to third-party property damages. Here’s an example to illustrate this type of scenario:

A plumber visiting a home accidentally bumps a customer’s garage with their company vehicle while exiting the premises, damaging the garage door. The customer sues the mechanic for the damages to their property. If this company has public liability cover, it can claim to cover the necessary expenses.

What does public liability insurance not cover?

Like motor vehicle insurance, public liability cover does not protect you from every occurrence. Having learned what it covers, it’s as important to know what it doesn’t cover before signing the policy. The following are some of the items this type of insurance does not cover:

• Injury to company or business workers

Public liability insurance, by design, is meant to protect businesses against third-party claims. By definition, an employee of a company is excluded from the meaning of a third party in this context. Insurance that protects your employees from loss or injury while on duty is called worker’s compensation for occupational injuries and disease (COID) cover[2]

• Legal judgements and costs arising from professional service or advice

If you’re in the business of providing professional service or advice for a fee, you could be held liable for any mistakes you make. For example, an accountant who fails to advise a client properly, thus incurring SARS penalties could be sued for the service they provided if the penalties can be directly linked to the advice that was given.

Public liability cover doesn’t protect you against this kind of risk. Insurance that does cover professionals, who provide advisory services as a business, is termed professional indemnity insurance or errors and omissions (E&O) insurance. Examples of the professionals who will benefit from this cover include engineers, financial advisors and lawyers.

• Rectification of poor workmanship

Public liability insurance covers third-party damages and loss or injury due to business work carried out. If you complete work that doesn’t satisfy your customer or doesn’t meet industry standards, or fails to meet requirements in the contract, it’s very unlikely this type of insurance will protect you.

• Legal judgements and costs arising from mistakes made by a company or business directors

Not all companies, especially small businesses, have the financial muscle to indemnify their directors and other officers in the case of a claim against them. Public liability cover doesn’t protect the company or its directors from liability claims due to their mistakes.

This is where directors’ and officers’ insurance can come to the rescue. Not only does this type of insurance protect directors and officers financially, but it also covers the company.

Get public liability insurance cover from First for Women

Protect your business from third-party claims. Get public liability cover from First for Women. It all begins with requesting a free and no-obligation online public liability insurance quote. It’s better to be protected and avoid financial stress if you encounter unforeseen and unfortunate public liability claims.

Sources:

[1] News 24: The number 1 reason most start-ups fail and how to avoid it

[2] South African Government: Claim for occupational injury or disease from Compensation Fund

Disclaimer: The information in this article is provided for informational purposes only and should not be construed as financial, legal, or medical advice.