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Public Liability and Professional Indemnity are often provided to businesses as part of the same package of business insurances, but they cover two distinctly different types of claim. In this guide we explore the differences and similarities between both types of insurance policy, including examples so you can see how each one works and decide which is best for you.
Tables of Contents
- What is public liability insurance?
- What is professional indemnity insurance?
- Can public liability and professional indemnity ever cover the same risks?
- Do I need public liability, professional indemnity, or both?
- When you need public liability insurance
- When you need professional indemnity insurance
- Can I get public liability and professional indemnity from the same insurer?
What is public liability insurance?
Public liability insurance covers claims from people outside of your business for injury or damage to their property as a result of your business activities or presence. This type of policy is designed to protect you, your business, and your employees from external legal action and the costs associated with legal defence.
- Whilst installing a sign your employee drops a hammer from the top of their ladder which injures a member of the public; they sue your business for compensation.
- An outdoor display blows into the road and causes a traffic accident – the drivers sue your business for the cost to repair their vehicles.
What is professional indemnity insurance?
Professional indemnity covers you for claims that your professional services have been negligent, causing your clients financial loss, property damage or in some cases bodily injury. This type of policy is designed to protect your business against allegations that it has not upheld a professional duty of care towards its clients, and can be purchased by individual professionals or businesses with multiple employees.
- You advise your client to generate their own power on site, but installation costs grow to the point where this becomes uneconomical; they sue you for the losses they have incurred, alleging that you did not take proper care in researching your recommendations.
- You supervise the installation of new software for your client’s sales business but shortly after launch the software develops bugs which cost your client several days of trading. They sue you for the losses incurred due to their down time, and for the costs to revert back to their original software system.
Can public liability and professional indemnity ever cover the same risks?
Whilst both professional indemnity and public liability can cover property damage and injury claims, the cause of the claim will determine which policy pays out. Typically, public liability will only cover claims caused by you or an employee’s presence. Professional indemnity on the other hand will cover claims where your advice causes financial loss, injury or property damage regardless of whether you have ever been to a clients’ site or met them in person.
- You travel to your client’s office to review their practices before producing a report and change recommendations, but you knock a hot cup of coffee on to one of their employees, causing a bad burn which keeps them from work for several weeks. Although the purpose of the visit was to provide advice, the cause of the injury was an accident caused by your presence, and your public liability policy will pay for the claim.
- A building collapses during a construction project intended to extend the property down into the basement, causing hundreds of thousands of pounds of damage. The homeowner claims against the architect and engineers responsible for the extension plans, stating that their property damage was caused by negligent design.
Do I need public liability, professional indemnity, or both?
This depends on your business activities; if you have specialist knowledge or experience there is always a chance someone could claim they you have failed to meet a duty of care. These claims can be made regardless of whether you charge a fee or not. For these reasons, professional indemnity might be needed.
Similarly if you, your employees or your business interact with the public in any physical way there is always a chance you could cause an injury or damage to property (hence the need for public liability insurance).
If you are in doubt you can always contact an insurance company or broker to discuss your potential exposure to claims from either source. There is no legal obligation to purchase either cover in most cases, and some businesses do operate without either, but they do so at their own risk. In the event of a claim for either professional negligence or accidental damage, a business without cover will be liable for their own legal costs and compensatory payments.
When you need public liability insurance
You need public liability insurance whenever there is a chance that you, your employees or your business activities have a chance of causing injury to others or damage to their property. Even business signs or other promotional material can potentially cause injury to others, so it’s unlikely that you are ever completely immune to public liability claims.
When you need professional indemnity insurance
You need professional indemnity insurance whenever it is possible that someone could lose money as a result of the advice or service that you provide. If you consult, advise or recommend a course of action to your clients then you are potentially at risk of negligence claims. Even nuisance claims can cost you both time and money to rebuff and a professional indemnity insurer will take charge of your defence, allowing you to continue to trade whilst any claims are being negotiated.
Can I get public liability and professional indemnity from the same insurer?
If an insurer provides you with a professional indemnity quote, they are likely also able to provide you with a public liability ‘add-on’, although if your work is manual or you produce a product for sale, they may not be able to supply an appropriate policy. It is less likely that a public liability insurer can provide you with a professional indemnity quote, as this is a more limited and specialist market.
It is perfectly acceptable to purchase professional indemnity and public liability policies from separate insurers, and if you purchase cover through a broker they may very well do this in order to best cover your business activities.