What Is Public Liability Insurance?
All the facts that you need to know
Owning a small business or being self-employed brings risks and public liability insurance (PLI) may help reduce those risks. If your business interacts with customers and the general public, you need insurance to help cover some of those risks. For example:
- A client comes into your office, sits in one of your chairs, and the chair collapses.
- Someone walks by your office and is injured when your sign falls on them.
- A member of the public is injured at an event your business puts on.
Public liability insurance may be the best solution to protecting your business from these risks.
What Is Public Liability Insurance?
Public liability insurance is insurance that covers the cost of claims made by members of the public that happen in connection with your business activities.
It covers costs for personal injuries, loss or damage to property, and death. Business coverage is for incidents on your business property and at events or activities your company organizes.
The PLI type of insurance policy is most common in the United Kingdom and Australia. In the U.S., many businesses use commercial general liability (CGL) insurance for this coverage. However, you may find a PLI policy that gives you the coverage you want.
Why Does a Business Need It?
If your business comes into contact with the general public on a regular basis, public liability insurance might be a good idea. Your work or your workplace could cause injury or damage to someone:
- If customers visit your business regularly—as with a retail shop or restaurant
- If you work at client businesses or homes—as a contractor
- If you work in public—like as an entertainer or a builder
This contact might be with customers, but it also can be with people who aren't customers but just on the property.
What Does PLI Cover?
Public liability insurance, like commercial general liability, covers the costs of defending your business during a lawsuit and payments of claims by a member of the public.
Bodily Injury: PLI protects against the risk of someone being injured on your business property. The coverage usually includes areas outside the property, like walkways and parking lots.
Property Damage: Coverage includes the protection of the business from damage to someone else's property while they are on that property or while you are doing work. For example, if a carpenter is working on a customer's home and breaks a window, that damage would be covered.
Legal Expenses: It covers the cost of hiring and paying an attorney to represent your business in a lawsuit brought by a customer or someone else is covered by a PLI policy.
What It Doesn't Cover
PLI does not cover everything. That is why it is important to read and understand any PLI policy you have.
It does not cover accidents that happen to you as the business owner during the course of your business activities. You will need your own personal insurance or general liability insurance if you want this coverage.
Also, accidents or injuries to your employees while they are working for you, at your business location, or elsewhere, including driving for business purposes are not covered. Coverage for employee accidents and injuries is covered by worker's compensation insurance that all employers are required to have.
Coverage does not extend to the costs to defend defamation charges (libel or slander) against a business owner personally. This type of coverage also includes false statements made by company executives or by the company (in advertising materials, for example). However, this insurance is included in general liability coverage.
PLI does not cover the costs for professional liability lawsuits sometimes called errors and admissions or malpractice. Malpractice insurance is usually for health care professionals, while errors and admissions insurance is for general professionals. These lawsuits are brought against professionals for their actions in a professional capacity, including doctors, CPAs, architects, chiropractors, and others. Professionals need malpractice insurance to cover them against these claims.
PLI vs. CGL Insurance
Public liability insurance is intended to protect businesses that come into contact with the general public on a regular basis. General liability insurance, on the other hand, has a broader scope, covering some types of personal liability, including defamation and other personal charges against owners and the company.
Is Public Liability Insurance Required?
In general, there is no law requiring PLI coverage. But you may be required to get this insurance in some situations. These include:
If you are applying for a business loan, especially if there is an SBA loan guarantee, your lender may require insurance to protect itself for you going out of business because of a claim.
If you are leasing property, your landlord or the property management company may require property and casualty insurance.
If you are holding an event open to the general public on public property, you will need a permit from the locality. The permit may require you to get some type of public liability insurance. For example, if you want to hold an event at a public place in Pinellas County, Florida, you must have a minimum amount of general liability insurance, and comply with other requirements.
Do I Need It If My Business has Limited Liability?
Corporations and limited liability companies (LLCs) have liability limits to protect the individual owners from having to pay individually in a lawsuit in most cases. But these limits don't prevent someone from starting a lawsuit against your business.
While the owners may have protection, the business does not, and it may be sued if someone is injured on business property or at a business event.
The Bottom Line
A review of your business' insurance coverage, in general, and specifically, is a must when you are starting out, or if you are concerned about liability. Personal liability insurance may be an alternative to general liability insurance in some instances.
Association of British Insurers. "Public Liability Insurance." Accessed Feb. 25, 2020.
California Department of Insurance. "Commercial Insurance Guide." Accessed Feb. 25, 2020.
Small Business Administration. "Get Business Insurance." Accessed Feb. 25, 2020.
Small Business Administration. "Insurance Requirements for SBA Loans." Accessed Feb. 25, 2020.
Pinellas County Government. "Special Events Users Guide," Page 14. Accessed Feb. 25, 2020.