Public liability insurance for your limited company – is it a legal requirement?

Public liability insurance is widely regarded as an important business expense for many limited company directors.

It’s a policy that protects your limited company by covering legal costs and compensation if your business is held responsible for injury to a third party or damage to their property.

There are several accidents or incidents that could prompt a claim against your company, particularly if you are public-facing in any way.

This could be as simple as a customer tripping and falling when visiting you, or you accidentally causing serious damage to a client’s hardware during a site visit.

A standard policy would also cover damages and costs that may be awarded if your business is found responsible for an injury to another person (not one of your employees) while going about your business.

It can also cover accidental damage to other people’s goods or property arising from your business activities.

It’s not a legal requirement to hold public liability insurance, but small companies often take out cover for the reasons we explain in this guide.

What does public liability insurance cover?

At its most basic, a policy will cover your company’s legal costs and compensation payments if the business is found to be responsible for covered injury or property damage to a third party.

In fact, legal claims can arise from accidents:

• Within your business premises;
• At your own home if you work from home and see customers there;
• At a client’s property if you work on a mobile basis and go to visit them for professional services;
• At an activity operated away from your normal premises if you’re organising it as part of your usual business.

As a result of an incident or injury, there are a number of costs for which a claimant might try to hold your company responsible. These may include:

• Their loss of earnings if they are temporarily or permanently unable to work;
• Medical or treatment costs arising from an injury;
• The cost of repairing damage you caused, or replacing an item altogether;
• Legal costs associated with defending and settling a covered claim.

A public liability policy can cover these costs, subject to the terms, exclusions and limit of indemnity set out in the policy.

Cover of £1 million or more is common, with limits such as £2 million, £5 million and £10 million also available. The appropriate level may be dictated by the risks your business faces or by the requirements of a particular client or contract.

It is important to note, however, that public liability insurance does not normally cover death or injury suffered by your employees in the course of their employment. That requires separate employers’ liability insurance where applicable.

What sort of incidents lead to public liability insurance claims?

Two common types of claim which public liability insurance can cover are:

• Where a visitor has hurt themselves – often by a slip or trip – on a business’s premises, and they believe the company was negligent in preventing that injury;
• Where someone else’s property is accidentally damaged as a result of your business activities. For example, you might damage an expensive piece of equipment while working at a client’s premises.

The first of these cases can be highly distressing for the business owner.

And if the claimant proves their case, the total costs of legal advice, loss of earnings or compensation for a serious injury can leave uninsured businesses facing a substantial bill.

What isn’t covered by public liability insurance?

Public liability insurance doesn’t cover every risk a limited company faces.

For example, it won’t normally cover claims arising from professional advice, errors or omissions. If you’re a consultant, contractor or other professional providing advice or services to clients, this is generally the role of professional indemnity insurance.

Policies also contain their own exclusions. These can include deliberate acts, damage to your own property and liabilities which should be covered by another type of insurance. Always check the wording of your particular policy.

Does my company need public liability insurance?

Public liability insurance is particularly relevant to companies that regularly interact with members of the public, although there’s no general legal requirement to have it, unlike employers’ liability insurance where the statutory requirements apply.

PL cover is often taken out by businesses that welcome people to their premises or enter clients’ homes, such as plumbers, hairdressers, restaurant owners and shop owners.

However, you don’t need to run a public-facing business to have a reason for buying it.

Many contractors and consultants have relatively little day-to-day public liability risk but still carry cover because an agency, end client or site operator requires it under the terms of a contract.

You may also find you need a particular level of cover, such as £5 million, to bid for certain public-sector or larger commercial contracts.

If you provide professional services to clients, you may therefore find that some clients require public liability insurance alongside professional indemnity insurance and, where relevant, employers’ liability insurance.

You can read more about whether different types of cover are compulsory in our guide to business insurance requirements for limited companies.

Get a public liability insurance quote

You can get a business insurance quote from Qdos here. We’ve worked with Qdos for over a decade across our sites, and they specialise in insurance for contractors, consultants and small businesses.