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Ensure your business has public liability protection

Published 13 April 2022

From event organisers to tradesmen making house calls, a huge number of businesses interact with the public – on a large scale or just one on one. But accidents happen and people or their possessions can be hurt or damaged – and if they choose to sue that can be a big risk for your business. This is what you need to know about public liability. 

Public liability describes your responsibility and duty of care owed to the general public. If you run a business, examples of where your business may interact with the public are where

  •  they have access to your premises 
  •  you have access to their premises
  •  you’re the organiser of an event
  •  you manufacture or sell products.

Duty of care is a legal principle that determines your responsibility for others. There is no strict rule to determine what level of care is owed to the general public. This is usually determined in court after an accident. 



Why your business needs public liability insurance protection 

Public liability insurance can protect your business against legal costs and damages brought against you, if it’s claimed you failed in your duty of care and someone is injured, dies, suffers mental anguish or their property is damaged due to your alleged negligence. 

Some examples where liability could occur are

  1.  when a customer (or member of the public in a shopping centre) slips on a spill and hurts their back or breaks a limb
  2.  a tradesperson conducting an installation inadvertently damages the owner’s property
  3.  people at public venues might suffer nervous shock after witnessing an accident caused through an oversight in safety precautions.

Obviously in many instances these incidents are completely unpredictable, but public liability claims can be very expensive and without adequate insurance cover small businesses in particular may never recover. The Insurance Council of Australia estimates that 70% of underinsured small business are as badly affected by legal claims as they are by serious earthquakes, fires or storms, and are unable to continue trading.

What types of business need public liability insurance?

Every single operating business has an exposure to the public. Whether that is at your place of work or theirs, or at venues including community spaces, the business needs to have public liability cover because mishaps can take numerous forms. 

The relationship with your business may not even be a direct one . For example, someone could suffer food poisoning after attending an event you organised, including the catering, even if you hadn’t produced the food and/or beverage yourself. 

Public liability insurance is mandatory for some occupations in some states in Australia, such as builders, plumbers and electricians, who can’t be licensed without it. Tradesmen such as building contractors may also need public liability insurance in order to enter worksites, especially if they are sole operators. 

Many businesses will have a responsibility to buy public liability insurance stipulated in lease agreements, or in purchase or supply contracts. 

What does a public liability insurance policy cover?

Public liability insurance may provide coverage for

  •  legal costs of a claim against your business
  •  legal fees for hiring a lawyer
  •  payment of damages claims
  •  payment for damage to someone else’s property.

What it doesn’t cover: public liability insurance doesn’t apply to risks that are covered by other policies, such as

  •  accidents that affect you or your employees 
  •  property damage that affects you or your employees 
  •  registered vehicles 
  •  faulty workmanship 
  •  breach of contract
  •  claims based on issues in a service that is provided.

Sometimes people are confused between public liability and professional indemnity insurance which refers to services provided in a professional capacity, while public indemnity applies to people outside your business sustaining injury or damage to their property as a result of your activities.

Product liability can be included in public liability insurance, which means that if you’re a manufacturer or produce goods you may be protected if someone sustains injury or damage to their property due to a fault in your product. 

How much public liability cover do you need?

There are stepped tiers of public indemnity cover available, depending on several factors in your business

  •  industry sector 
  •  the number of persons using your service
  •  they nature of your product sold or supplied
  •  whether you employ subcontractors.

These are topics for discussion with your insurance broker who can guide you to ensure you have an adequate level of cover for the exposures that apply to your business – and avoid risking your future by being underinsured when the unexpected occurs.

Further reading


Public and product liability insurance

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Gallagher provides insurance, risk management and benefits consulting services for clients in response to both known and unknown risk exposures. When providing analysis and recommendations regarding potential insurance coverage, potential claims and/or operational strategy in response to national emergencies (including health crises), we do so from an insurance and/or risk management perspective.
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