Public liability insurance (PLI) meaning and definition
Public liability (PL) insurance is one of the main types of insurance that a business needs. In fact, there are calls for it to be a legal requirement in the same way that employer’s liability insurance and motor insurance are required by law.
Even though it’s not a legal requirement to have public liability insurance, often you are required to have this type of insurance as a condition of your membership of a professional or trade body. It can also be a contractual requirement and, without public liability insurance, you might not be able to work.
Public liability covers compensation claims made against you by third parties who allege that you have done something or failed to do something that has resulted in them suffering a loss.
We live in an increasingly litigious world. There can’t be anyone who has missed the advertising by “no win, no fee” accident management firms who are looking to help people claim compensation.
Compensation claims can be expensive to settle. An injury such as a broken wrist suffered by someone who has slipped or tripped could cost £20,000. A more serious injury could cost ten times that amount.
As well as the compensation awarded for the injury itself, the claimant could also claim for lost wages if they have been unable to work as a result of their injury. There could also be other expenses, such as travel costs that they have incurred, and they will be seeking reimbursement from you.
And even though a relatively minor claim for light skin grazing following a trip might only result in a compensation award of £500, by the time the legal fees and other associated expenses have been factored in, that compensation claim could end up costing considerably more.
Because compensation claims are expensive to settle, all businesses should have public liability insurance to protect them. Not having public liability insurance could mean that you would be facing a compensation claim that would cause your business to struggle financially, or potentially a claim that could put you out of business completely.
As well as being expensive to settle, compensation claims can often involve complex legal arguments. Because your public liability insurer will have a trained legal team that specialises in handling compensation claims they will be able to deal with these legal arguments on your behalf.
Public liability insurance also includes the legal fees expenses business cover that can be involved in compensation claims. These costs can be substantial.
The policy excess
Like most forms of insurance, public liability insurance tends to have a policy excess. This is the amount that you need to contribute towards each claim.
It’s important to remember that even though your insurer may be able to successfully defend you against a compensation claim that’s been made against you, it’s possible that you may still need to pay the policy excess. This is because a successful defence will normally mean that the insurer will have incurred legal costs.
A public liability insurance policy will cover compensation claims arising out of things that you have done or failed to do, but it won’t cover compensation claims arising due to defects due to products that you’ve sold or supplied.
To ensure you aren’t uninsured if such a compensation claim is made against you, most public liability insurance policies come with a products liability insurance section as standard, or the insurance policies can be extended to provide that cover.
Financial loss cover
Public and products liability insurance only covers you if the compensation claim made against you involves either an injury or property damage. Claims for purely economic losses are not covered.
By making sure that your public liability insurance policy has a financial loss extension, you can ensure that you’re covered if a compensation claim for a purely economic loss is made against you.