Why do we need public liability insurance?

What is business insurance?  

This is a general term used to describe a few individual types of insurance that most small businesses need.  

The most common are:  

  • employers’ liability insurance  
  • professional indemnity insurance 
  • public liability insurance.  

You are legally required to have employers’ liability insurance if you employ anyone.  

You may also need professional indemnity insurance if you provide professional advice and services. 

What does public liability insurance cover?  

It protects you and your business if a member of the public succeeds in bringing a claim against you for damage or injury caused by your work activities.  

For example, if someone parked a car near a building site, and you or your team accidentally damaged it while working on site, the car owner may decide to bring a claim against you to cover the cost of repairs. 

Is it worth it?  

Imagine if you had left a piece of equipment on the floor, which a member of the public then trips on. The trip causes them to break their ankle. 

It’s a serious injury. The break requires surgery.  

As a result, this person is unable to work for nearly three months. They must get a taxi to the hospital every time they go for a check-up. They also need someone to take their children to school.  

Because the accident was the result of your negligence, they bring a claim against your business.  

If their claim is successful, they could claim all the associated expenses, as well as for the injury itself. The medical treatment alone could be anywhere between £12,00 and £65,000.  

It’s easy to see how a relatively minor injury can quickly add up to a large claim. If you can’t pay the amount ordered, your business may be put at risk.  

Would I have to go to court?  

When you have public liability insurance, the insurance provider will normally allocate a lawyer to deal with any claims on your behalf.  

If you don’t have insurance, you will have to deal with this yourself.  

Handling the case will include dealing with all the court paperwork, filing any defence and evidence, and attending court.  

How will it affect my business if I can’t pay?  

This will depend on how your business is set up, and whether it’s a limited company or you’re acting as a sole trader.  

If you can’t pay an order for damages, the person bringing the claim is entitled to bring proceedings against you to get their money.  

If you are a sole trader, that could mean being personally responsible for payment, and could mean putting your home at risk if you own it.  

As a limited company, you could face liquidation proceedings.  

Either way, your credit rating would also be significantly affected.  

Is it normal to have public liability insurance?  

Most moderate-sized and large contractors will insist you have cover before they agree to work with you. Your trade association may also need you to have insurance.