Liability Cover Explained

  • Public Liability
  • Employers' Liability
  • Professional Indemnity
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What is Liability Cover?

Liability insurance is protection from claims made against you after an incident that was perceivably your fault. It is an integral aspect to many policies and there are many kinds; here we will take a closer look at public liability and employers’ liability insurance, and the legal requirements of liability insurance coverage for a small business.

If you are looking to get liability insurance for a business, you first need to know the intricate differences between each type of cover. Liability cover pays the cost of compensation claims, injury claims, medical costs and legal expenses pertaining to an accident, injury, or poor business advice that occurred on your premises or as a result of your actions.

From hotel guests slipping on a wet floor (injury), to a salon patron having a bad reaction to tanning lotion (illness), there are endless ways in which customers or employees could potentially bring legal action against a business or individual employee.

What is Public Liability Insurance?

For example, if you own a beauty salon and one of your customers is burned accidentally with hair straighteners, he or she may choose to take legal action against you. With public liability insurance, the legal and compensation costs would be covered by your policy. It does not just apply to incidents that occur on your business premises, but also as part of the day to day running of it. Taxi drivers, whether self-employed or working for a firm, could be involved in an accident in which case public liability insurance would cover any medical costs or claims made by your passenger. Furthermore, if there is an incident involving a pedestrian rather than a customer, the same costs would be covered by a public liability insurance policy.

Anyone who works with or in close proximity to members of the public will benefit from this type of cover. No one can predict when an accident will occur and, even if you do everything you can to prevent it, there are still risks. Better planning can help you defend yourself against even the most apparently baseless claims.

Why do I need Public Liability Insurance?

If you run a business that deals regularly with members of the public, it is highly advisable to take out a policy that includes public liability insurance. There are many ways members of the public could become injured or ill at any business premises, which is why it is so important to be fully protected.

What is Employers’ Liability Insurance?

The costs of defending yourself against a work-based compensation claim can be extensive. There are legal and medical costs, as well as the cost of any compensation payment that is due to the employee. If a worker becomes ill or injured at work, they will be unable to earn a wage and you will have lost a member of staff for an indeterminate period of time, resulting in financial losses for both of you.

Employers’ liability insurance will also cover you in the event of a criminal prosecution should the employee have been injured or made unwell as a result of a rule or regulation being broken. Whoever is responsible for the incident, an employee still has the right to make a claim.

Why do I need Employers’ Liability Insurance?

If you employ anyone to work for your business, you must have employers’ liability insurance. Regardless of whether they are full- or part-time, unpaid intern or volunteer, if they are technically employed by yourself, they must be covered by this type of policy. You have a duty of care towards your employees, allowing them the freedom to work in a safe environment.

What is Professional Indemnity Insurance?

Professional indemnity insurance, also known as professional liability insurance, is cover for a business to protect against claims made by customers or clients who have suffered financial losses as a result of your business’ advice or services.

Whilst standard liability insurance covers physical ailments and injuries, professional indemnity insurance is more concerned with protection against errors made by a company, which has led to losses for the customer. There are a few reasons why someone might choose to take action in this way, such as:

  • They have been given financial advice that has resulted in a loss of their investment
  • A mistake in designs or calculations has had a negative effect on their finances or budget
  • Their data has not been secured adequately and their details have leaked to a third party

Professional indemnity insurance can be applied to a number of industries, including but not limited to business consultants, risk management companies, surveyors, architects and designers. Any business that requires a customer to make a decision based on your expertise can benefit from this.

Is Liability Insurance Required?

Legally, all businesses that employ staff must have employers’ liability insurance, but public liability insurance is not a legal requirement. Having said that, having cover for both staff and members of the public is hugely beneficial.

If you do not have employers’ liability insurance, your business will face a fine of up to £2500 per day. You must be insured for at least £5 million, however an assessment of your business’ specific risks may lead you to consider a larger amount.

Businesses run when all elements are working together seamlessly. When an accident happens to a customer or member of staff, it can throw a spanner in the works. This can leave all parties out of pocket, often effecting both the running and reputation of the business in question.

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