What really is public liability insurance?

Public Liability is a catch-all term for insurance covering your legal responsibility to pay compensation to others for personal injury or property damage. It goes by a few names - you'll hear liability, public liability, product liability, broadform liability, commercial general liability, and other portmanteau terms like public indemnity. But they all essentially mean the same thing.

One thing that confuses people at first instance is that almost every type of asset insurance you buy includes a public liability component, but they all cover different things. As a broad rule, the public liability insurance you get with asset insurance only covers your legal liability related to your use of that asset.

Examples of public liability packages

So for example:

• Car insurance public liability covers your liability to pay compensation to others for injury or damage arising from your ownership or use of the car as a car. Say, from a car accident. More commentary further below.
• Home building insurance public liability covers your liability to pay compensation to others for injury or damage arising from your ownership of the building and land as a home only. E.g., a visitor trips over unsafe paving and blames you for the injury.
• Home contents insurance public liability covers your personal legal liability to pay compensation to others for injury or damage as a citizen of Australia. Say, you hire a hall for a party, knock over a candle, and burn the hall down.
• Boat insurance public liability covers your legal liability to pay compensation to others for injury or damage arising from the use of the boat as a boat. E.g., you run into another boat, water skier, or hit a jetty while docking.
• Travel insurance public liability covers your legal liability to pay compensation to others for injury or damage while visiting another country. Say, you run into another person while riding your bicycle along the river.

They key thing to remember here is that each insurance only covers the risk related to the asset insured. So your car insurer won't pay for public liability claims relating to use of a boat - every separate type of insurance requires its own separate public liability cover.

What about business liability insurance

Business liability insurance is similar in a sense - it covers your legal liability to pay compensation to others for injury or damage arising from your business. There's no overlap with other types of insurance; so even though your business might use those other assets (with their own public liability insurances), the question at hand is whether your liability arose from your business or from the asset.

Clear as mud?

Consider a taxi driver in WA. If the driver causes an accident and injures the passenger (or others!), you'd expect the vehicle liability insurance (and compulsory third party insurance from the state insurer) to make the passenger whole. But what if the passenger were injured while getting into the vehicle. The injury didn't arise from the use of the vehicle as a vehicle, the injury arose from the taxi driver's business.

What about a home-based business?

Ah, this one is topical, since Australian home insurers started enforcing the rules more strictly in our Covid world.

From an insurer's point of view, the key question is whether the risk (and the injury or damage) arose from the home-owner's ownership and use of the home as a home or whether it was from the business risk. And to further complicate things, if the home insurer feels aggrieved that they weren't told about the home business, it could jeapordise the entire building & contents insurance.

So don't take chances - get expert advice early whether your insurance is right or not - don't wait until you need to use it before you find out that your insurance is invalid.

Your business is unique, so treat risk and insurance as unique too

I offer obligation-free risk consulting to business and not-for-profit groups alike. I pride myself on scrupulous honesty - if you already have appropriate insurance and procedures in place, I'll tell you outright to stick with what you've got. If there is room for improvement, I'll give you clear plain English directions as to how to improve. Whether you pass that advice on to your current provider or engage me to arrange it for you, I'm here on your side to make your life easier.