Public Liability Insurance in Australia

Not sure if you need public liability cover? If your work can impact the public in any way, you probably do.

Every time you turn on the TV, you hear about another lawsuit. And if you're in business, chances are you're engaging with the public just enough to put yourself at risk of legal action if something goes wrong.

Given the extreme financial and reputational risks that a lawsuit can pose, public liability insurance provides "peace of mind" at a relatively low cost.

This guide will teach you how public liability insurance works and give you the tools you need to find the right policy.

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What is public liability insurance?

Public liability insurance protects you if someone is injured or their property is damaged as a result of your business activities e.g. a customer could sue you for an injury on your premise.

It refers to damages from the physical surroundings and physical property rather than damages from services you provide. For example, it will cover you if someone slips and falls on your property, but not if you splash bleach into their eye while dyeing their hair (more on this later).

It also doesn't protect you if it's your employee who is injured. That falls under the mandatory worker's compensation cover.

If approved, your public liability claim will cover what you owe the person suing you, plus your legal fees.

Do I even need public liability insurance?

After worker's compensation, public liability insurance is one of the foundational forms of cover that very few business should go without. It's not mandatory in most cases, but lawsuits of this sort can affect almost any type of business and put you on the hook for large sums of money.

You don't necessarily have to have a customer-facing retail business or even a physical location to need this cover. If anyone could be injured because of your business activities, you could find yourself in court.

"Impacting the public" explained

You don’t have to have a public-facing business to impact the public. If there’s a chance a member of the public could injure themselves on your property or that your equipment could cause them damage, then you could be held liable.

Here are some situations where your work could impact the public:

• You invite customers onto your property. Supermarkets, clothing shops, pizza parlours and beauty salons are just a few businesses that rely on public foot traffic to stay in business. With foot traffic comes the potential for injury.
• You invite anyone onto your property. Even if you're not a customer-facing business, a member of the public could still get injured on your property. For example, a courier visiting a corporate office could slip and fall on their way out of the building.
• You take your business out into the public. Those providing mobile services can be held responsible if they injure someone or damage something while out and about, especially if they carry equipment. Window cleaners, painters, plumbers and mobile hairdressers all need public liability insurance if they want to be protected.
• You're in the trades. Businesses operating on temporary work sites will need public liability insurance even though they aren’t inviting the public onto the site. Why? Because an innocent bystander could be injured by stray equipment. Independent contractors on site will need their own cover apart from the business that hired them.

Costs to understand

If a public liability claim were to arise then you'll need to cover both 1) Any compensation to the person who makes a claim against you as well as 2) The cost of your legals expenses e.g. hiring a defence lawyer, court fees. Public liability insurance is designed to help you cover these expenses e.g. if an accident happens at your restaurant.

What industries need public liability cover?

As mentioned previously, almost all businesses would benefit from this protection. Here are some obvious examples:

• Retail. Grocery stores, book shops and department stores have physical locations with lots of foot traffic, increasing the chances of someone getting injured.
• Health and beauty. Gyms, physical therapy centres and hair salons also bring the public into their premises. Even solo professionals may need public liability if they carry equipment that could damage or injure a member of the public.
• Hospitality. Restaurants, bars, clubs and cafes bring in lots of people while also creating a fast-paced environment where injuries are more likely.
• The trades. Any business or independent contractor operating on a work site would benefit from public liability insurance, and in some cases are required by law or by contract to have it.
• Entertainment. e.g. dancers, performers, event organisers, etc.
• Real estate e.g. Landlords, Strata management.

It’s important to remember that public liability will protect business in these industries if they cause injuries or damage that are not related to the professional service provided.

Do small businesses need public liability insurance?

Regardless of business size, public liability insurance is suitable if the business has a physical premise or operates in public (such as a mobile business). Small businesses that fall into this category include:

What's covered?

What is and isn't covered?

• Covered
• Not covered

Who is covered under a public liability insurance policy?

When a business takes out a public liability policy, the policy will protect the business and people directly employees by the business, including:

• The business itself
• The company directors
• The employees of the business
• Business partners

Contract workers are usually not covered by a business policy, so either the worker or the business would have to take out extra cover if they want to be protected from that person's actions.

Questions everyone asks when it comes to public liability

What is the difference between...

Public liability insurance, product liability insurance and professional indemnity insurance?

What follows is a quick rundown, but you can also check out our detailed guide for a fuller explanation.

Do I need all three types of liability insurance?

Each of these products covers a different set of situations. That means you won't be able to buy public liability insurance and have it cover situations that are more suited to professional indemnity (or vice versa).

Insurers will sometimes bundle public liability and product liability together and call it something like business liability insurance, public and products liability insurance or just liability insurance. If you need both types of these, a combined policy like this is just fine. Just read the fine print to make sure it covers both sets of circumstances, and don't forget to add professional indemnity insurance if you need that too.

Can I combine public liability and professional indemnity under one policy?

Professional indemnity insurance covers the professional and his or her actions but does not provide cover for an accident that may take place on the professional’s premises when a customer is present. The professional will have to purchase public liability insurance cover as part of his or her full insurance package.

Is public liability insurance compulsory?

Carrying public liability insurance in Australia is generally not mandated by law, although different states can require it for particular industries. You may also be required to carry it if you enter into a contract that says you must. Here are a few scenarios where you'd be contractually obligated to carry public liability insurance:

• It's required to earn your licence. Some states will require you to hold this insurance if you work in an industry that is especially prone to accidents. For example you can't get your electrical contractor license in Queensland unless you hold this cover.
• It's required for a particular job. If you're a subcontractor on a large worksite, the builder may require that you hold public liability insurance.
• It's required to hire a venue. If you are organising public event and have hired a venue, the venue owner or local council may require you take out a public liability policy.

Contract or not, public liability insurance is a foundational form of protection that most business owners should consider. Lawsuits can run into the millions of dollars and could easily become the biggest financial liability to your business.

States or territories where public liability insurance is required

Each state has different requirements around public liability insurance. While it may not be mandatory to have cover to operate your business, it might be mandatory if you want to enter into a contract with the government. For example, most governments probably won’t rent you public space to hold an event unless you have public liability insurance.

Based on out research:

• New South Wales: Not compulsory for any business to have public liability insurance.
• Queensland: Compulsory for electrical contractors to have public liability insurance before they can get their licence.
• Victoria: Not compulsory for any business to have public liability insurance.
• Australian Capital Territory: Not compulsory for any business to have public liability insurance.
• Western Australia: Not compulsory for any business to have public liability insurance

Comparing and buying cover

How do I compare public liability insurance policies?

We'd usually recommend using a broker to help you compare policies, because there's a lot more to business insurance than just public liability. A broker will consult with you to determine the appropriate package, and then go off and find you the best value for your money.

But if you want to go it alone, here are a few questions to ask yourself as you mull your options:

• Does the insurer offer other products you need for your business? There are dozens of cover types a business might need beyond just public liability, and those business are better off going with someone who offers the whole package. It's more efficient, you might receive a discount and you can be comfortable knowing you’re with an insurer who has a holistic view of your business risks.
• What will your out-of-pocket costs be? Whenever your claim is approved, you'll almost always have to pay a small portion of the payout yourself and the insurer will cover the rest up to the insured amount. This is your excess. All else being equal, the policy with the higher excess will be the worse deal.
• What will your payout be? If you need to make a claim, your insurer will have a limit on what they will pay out. The higher the benefit limit, the better for you. So make sure you take this into consideration when comparing policies
• What's included? Not every policy will cover every instance of liability. For example, one policy may only cover you if the damage occurred on your property. Others will extend this to include damage you cause elsewhere, such as on house calls. Don't buy a cheaper policy over a more expensive one until you are sure it includes the cover you need.
• Is anything excluded? Every policy has a list of reasons they won't pay your claim. For example, most won't pay for damage related to asbestos, and most won't pay your claim if you've done something illegal that caused the damage or injury. When comparing policies, make sure you can live with your chosen policy's exclusions.

How much does public liability insurance cost?

The cost of your policy is entirely dependent on your business' unique circumstances. The insurer will analyze your business to determine the likelihood that damage or injury could occur, and they'll use that to calculate your premiums.

Depending on the nature and size of your business, the cost could be anywhere from a few hundred to tens of thousands of dollars per year.

Here's what an insurer will take into consideration when coming up with your premium:

• What your business does: Some businesses simply attract more risk than others. For example, the risk of injury or damage on a construction site will be higher than that of a retail store. Insurers will analyse what you do, compare this to past claims in that industry and factor this into your premium.
• How big your business is: The larger the business, the higher the risk of injury or damage. Factors like annual turnover and employee count will affect your premium.
• Your business location: You can expect a higher premium if your business is in a high-risk location, such as an airport, construction site, railway station or mine site.
• The structure of your policy. You can affect the price of your policy by choosing a higher or lower excess or higher or lower benefit limits.

Is public liability insurance tax deductible?

Public liability insurance premiums are considered a business expense and are therefore tax deductible. Each year you'll get a tax invoice from either your insurer or your broker, depending on who sold you the policy.

How to get cheap cover

While you don't want to skimp on a product that could literally save you from millions of dollars in damages, there are still ways you can save some money. Here's what you can do:

• Go through a broker. A broker has relationships with multiple insurers and knows their products inside and out. After getting to know you and your business needs, the broker can then find a few matches for you and help you negotiate the best rate. This is especially helpful for business insurance products because it also saves you time from having long in-depth discussions about your business with each individual insurer.
• Increase your excess. Your excess is the amount you'll pay out-of-pocket when you claim. If you agree to pay a little more, you can get your premiums decreased. Just make sure it's an amount you could handle if you ever had to claim.
• Decrease your benefit limits. The benefit limit is the amount the insurer will pay you (or the one suing you) if you have to make a claim. The less they have to pay you, the cheaper your premiums will be. Remember that lawsuits can involve massive amounts of money, so consult with your insurer or broker before reducing the limits by too much. They can help you understand the potential risks you could face based on your circumstances and keep you from taking out too little cover.
• Get a package deal. Public liability is just one form of business insurance, and chances are you would need several more (building and contents, theft, product liability, etc). Business insurance is all about customisation, so it makes sense to go through one provider for everything, so that they can customise your policy for you. There's also a chance they'll apply some multi-product discounts.

Some final questions you might have

• What level of public liability coverage should I buy?

  The indemnity limit has to be chosen on the level of risk your business is taking every day. For some industries, there are minimum levels, normally around $5,000,000.

• Is public liability insurance mandatory?

  It depends on the state. You should check with your state insurance commission whether your business should have mandatory public liability insurance. However, employers’ liability insurance is required by many states.

• Does it cover staff and employees?

  Yes, but in most cases subcontractors are not covered.

• Does it cover tradesmen?

  Yes, as it is one of the biggest segments of the market.

• Can it be paid monthly?

  Yes, you can pay it in monthly instalments.

• Does Public Liability Insurance cover defective work?

  Yes. Defective or faulty work can be covered, however only certain costs are eligible for cover. Generally the damages and injury incurred from the faulty work will be covered but there is no cover for the additional costs incurred for rectifying the defective work.

• What is Broadform Public Liability Insurance?

  Broadform Public Liability Insurance is the term given to policies that provide cover for both Public Liability and Product Liability. Not all policies will automatically cover both product and public liability so it is crucial to check the policy terms when signing up for cover.

• How much cover can you take out?

  Generally, when you decide to buy public liability insurance, you decide the amount to insure, the so-called limit of indemnity, depending on the possible damage you could cause. This limit is usually set over $500,000 or $1,000,000. Public liability insurance coverage depends on the damage request of a third party. If the court or the judge states that you are accountable for financial compensation, this policy can cover all the claims up to the limit of indemnity.

• Does Public Liability Insurance cover accidental damage?

  Yes. Public Liability Insurance will generally provide cover for accidental damage to property that is owned or controlled by a third party.

• Can I get Public Liability Insurance for a one off event?

  Yes. There are a number of specialist insurers that offer Public Liability Insurance for one off events. Most larger insurance brands will not provide cover for single days/events but can extend cover to include additional cover that may be required for these events.

• Should I work with a broker to apply for cover?

  Finding the right policy to give adequate public liability cover for your business is no easy task. Failure to determine an appropriate level of cover can have devastating impacts on a business. This leads many businesses to enlist the services of a broker to help them find an appropriate cover option. Generally, a broker will:

  • Provide risk management advice based on the nature of the insured’s business by conducting an analysis of a business’s risks and suggesting ways that these risk factors can be minimised
  • Provide a quote for the business and offer recommendations on available insurance products
  • Help the business determine an adequate level of cover based on the risk of liability they face through the provision of their services
  • Provide advice on the different product features and exclusions that the insured should be aware of
  • Once an insurance package has been selected, the insurance broker can finalise and provide the paperwork for the insurance product
  • If at any time a claim is made against the business this will be followed up by the insurance broker from the commencement of the claim to its closing stage

• Can contact workers take out Public Liability cover?

  When you’re a contract worker, public liability insurance offers many potential benefits. As a contractor, you run your own business and can be held legally responsible for your own actions, so you need to have an adequate level of financial protection in place if any claims are brought against you. Similarly, if you’re a subcontractor, you probably won’t be covered by the main contractor’s insurance policy, so public liability cover is an important consideration. Without public liability insurance in place, the financial consequences of a claim made against you could be disastrous. The good news is that it’s quite easy for contract workers to take out cover. Shop around for an insurer that allows you to tailor a policy to suit the specific cover needs of your business, and take advantage of the financial protection and peace of mind that this type of cover offers.

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