How Does Public Liability Insurance Work?


Public liability insurance offers protection from claims made by third parties against your business. It will cover any compensation or financial settlement agreed upon and any costs associated with legal proceedings. 

To ensure a company’s financial protection from losses incurred by accidents and incidents that involve a member of the public, adequate public liability insurance coverage must be acquired. Court cases and legal claims can take a heavy financial toll. 

Proper insurance protection can help to address costs associated with injury and damage settlements and related legal fees. According to the NimbleFins guide to public liability insurance companies, this type of business insurance protects companies from certain allegations of negligence and from the financial burden associated with paying out large settlements awarded for damages. 

What is covered under public liability insurance?

Public liability insurance coverage is concerned with damage, loss, or injury claims that are brought by a third-party (e.g. a customer or passer-by) against a business. For businesses where public interaction is commonplace, this type of insurance is often considered to be essential.

Though it is not a legal requirement, public liability insurance will protect from accidents, injury, or loss caused in association with business operations. It protects both third parties like members of the public and the finances of a business. For owners of premises, or locations that the public frequent, this type of liability coverage can protect from many eventualities.

In addition to protection from incidents that occur on business premises, it also provides cover when entering clients homes or properties to perform services.

There are many instances where a liability claim may be triggered and monetary settlements need to be paid. For example, damage caused when installing an appliance in a customer’s home resulting in flooding could be covered. Or a person falling over storage boxes in a shop and spraining their wrist could have medical treatments and transportation to doctor appointments paid for by a successful public liability insurance claim.

Common claims are:

  • Slips and falls caused by objects or uneven or damaged surfaces
  • Obstructions and hazards
  • Sharp protruding objects
  • Falling objects
  • Food poisoning
  • Property damage

What is not covered by public liability insurance?

Public liability (PL) insurance does not cover certain types of business-related liability that are covered by other types of business insurance.

For example, PL insurance does not cover employees for any work-related injuries or damage to their property. Instead, employers’ liability insurance, which is required by law, covers work-related injuries or illnesses. 

And public liability does not cover claims that a client suffered a financial loss due to professional negligence or a mistake. To cover this type of claim, businesses should look to professional indemnity insurance companies

Also, PL does not cover injury or damages related to products that a company makes or sells. For that, businesses need product liability insurance

What is a public liability insurance certificate?

Even though a company is not legally required to obtain public liability insurance, it can be necessary to perform business functions. There is an expectation from the public, and sometimes clients, that a company has appropriate coverage in place. 

A public liability insurance certificate is an easy way to prove that a business has adequate coverage. It conveys professionalism, signals legitimate business practices to customers and builds brand confidence. Some trade associations and professional organisations often require proof of insurance before allowing members to join. 

A public insurance liability certificate is quite detailed. The certificate will typically document the following information:

  • Company name
  • Business description
  • Insurance period
  • Policy number
  • Policy terms
  • Coverage exclusions
  • Indemnity limits

The indemnity limit is the maximum amount that the insurer is prepared to pay in the event of a claim. This information is important as contracts or work agreements will often specify a minimum indemnity limit that is required.

Displaying a public liability insurance certificate is not required by law though many companies choose to do so for customer confidence and peace of mind. A hard copy certificate is supplied by the insurance provider and may be displayed in a visible position, often with other certificates of coverage like employers’ liability. Digital copies can be displayed on a company website and viewed online.

How to make a public liability insurance claim

To start a public liability claim due to an incident, a business first typically contacts their insurer to report the incident and start the claims process. The insurer typically has representatives on hand to support a business through this process. A business that purchased cover through a broker might first contact the broker for assistance. Either way, documentation will be needed to provide information to the insurer with as much supporting evidence as possible. 

This could include:

  • A written statement including times and dates
  • Photographs of the area
  • Reporting the accident to insurer and/or authorities
  • Receipts for medical treatment 
  • Receipts for other associated expenses

Any claim reported will be assessed by the insurance company who will determine its validity. Information and details pertaining to the claim will be reviewed to check that the claim meets the necessary policy criteria. If everything is in order, the claim will move forward and a settlement made minus any excess payment.

A policy excess is an amount that is agreed to be paid by the policyholder towards a claim. So if the excess is £250 and the claim is £2,000, the insurer will pay out £1,750. Payments for policy excesses can be paid upfront, or sometimes the insurance company will deduct it from the final settlement.

If a business does not possess public liability insurance then a claim can still be brought against a business. In this case, the settlement or damages would be recovered and paid directly from the business in question, and not an insurer.