Public Liability Insurance

Why is public liability insurance required?

Public liability insurance is required because it covers legal claims against your business.

Sole trader owner/s, director/s or employee/s could all potentially be blamed for injury to a third party ie, a member of the public, or damage to property.

Why you need public liability insurance!

You need public liability insurance if you provide goods or services to the general public and other businesses.

If you are a sub contractor, self-employed teacher, manufacturer, plumber, hairdresser or IT consultant and you don't have employers and public liability insurance policies then you are strongly advised to take action now.

In general the law states that a large or small business or individual sole traders pays for losses caused by the business or its employees. Without public liability insurance cover then the full cost of a loss - a civil wrong to which the court provides a remedy - will have to be paid by the business or sole trader self employed person.

Compensation awards can amount to significant sums of money. If a successful claim is for a large amount of money, or the costs of defense are high, this could mean having to sell your house and contents.

What happens if my small business does NOT have public liability insurance?

Say a client suffers an injury at your office - it could be something as simple as tripping over a computer cable, resulting in a broken arm or leg.

The injured party (claimant) will contact a solicitor and begin a claim for compensation against you for their injury.

Without public liability insurance the process of defending your business against such a claim is fraught with pitfalls:

• You receive court notification of a claim.
• You find a solicitor and agree fees.
• You provide the solicitor with any information they ask for.
• The solicitor collects evidence and documents and offers advice.
• You pay the solicitor's costs.
• Should the claim go to court, you pay barristers and court fees.
• If you lose you pay compensation/damages, medical costs and legal fees of both parties.
• Should you win you need to recover as much of your legal costs from the claimant.

With public liability insurance, the process is more straightforward and the end result likely to be less damaging:

• The injured party (claimant) will contact a solicitor and begin a claim for compensation against you for their injury.
• You pass the claim documents on to your insurance brokers.
• You can carry on with your business.
• You provide the insurers and their solicitors with any information asked for.
• The insurance company deals with the legal complexities and costs.
• If the claim is found against you (ie, you lose the case), then the insurer pays the compensation/damages/legal costs.
• If the claim is found for you (ie you win the case), then the insurer collects the legal costs from the claimant.

Clearly, having a policy in itself should act as a discouragement to having spurious claims against you.

What do I need to know about liability insurance?

With some exceptions eg, horse riding establishments, public liability insurance cover is voluntary, but it is always advisable to take out this kind of cover to insure against the risk of a damaging lawsuit.

Employers liability insurance on the other hand is a legal requirement - the minimum cover needed is £5 million and you must display the certificate on your premises. Most policies offer a minimum of £10 million.