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Public Liability Insurance

Public liability insurance is a type of policy most often held by businesses, contractors, and other entities and persons as a way to shield themselves from liability resulting from interaction with the public.

To best understand the purpose of public liability insurance, it might be best to first understand what it isn't. Public liability insurance is a very limited version of the popular general liability insurance coverage.

What It Covers
Simply put, public liability insurance protects a business from injury or other damages tsustained by a third party on property owned by the business. For example, a gas station may own public liability insurance to protect itself from liability resulting from the public, the actions of the public, and the people with whom it does business.

This kind of insurance is most commonly held by retail businesses that service a number of customers on their own property. While public liability insurance does protect these businesses from customer or third party claims, it does not protect the business from the claims of other parties. Employees, for example, can sue a company with public liability insurance and the owner, or the corporation itself, is not protected by any public liability insurance it has in its possession.

Likewise, others directly involved in your business, including investors, can also sue a company and skirt the public liability protection. This contrasts to general liability insurance, where any and all damages or injuries that happen as a result of normal business activities are protected by the insurance policy.

One of the most common examples, for good reason, is that of a wet floor. A customer who walks into a business and slips on a wet floor may sue the business owner for negligence, even if the business owner properly announced the floor was wet with a sign or other notice. While the lawsuit is unlikely to be decided in the plaintiffs favor, and the business owner is sure to win, the cost of going to court can often exceed any real damages. In the American system of law, each party pays their own legal expenses, regardless of the outcome. Thus, a business owner may be left with the costs of going to court, even if it is proven the business was not at fault. Public liability insurance would protect a business in this instance.

Public liability insurance makes great insurance for self-employed persons as well, even if there are no real business premises. A plumber, for example, would be protected by his or her own public liability insurance should he or she damage the home in which he is working. This type of insurance for only one person is very inexpensive as there is very little interaction with the public.

Public Liability vs General Liability
For business owners, the choice between public and general liability insurance is a very important decision. While public liability offers only limited protection, and is not all-inclusive, the annual premiums are usually a fraction of the size of a similar general liability insurance policy might be.

Generally speaking, larger businesses are best to avoid public liability policies in exchange for all-inclusive general liability policies. Though more expensive, businesses are shielded from all types of risk. Plus, since large businesses are more likely to interact with investors, third parties, and need protection from other liability, the cost of a general liability insurance policy is a small price to pay.

Small business owners or the self-employed may not have use for the full coverage of a general liability policy, however. Also, small retail outlets and businesses may opt for public liability coverage as minimal insurance protection from customers and third parties on their own property.

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