Public Liability vs Professional Indemnity Insurance?

What is the difference between Public liability and professional indemnity insurance?

Most business owners need public liability insurance to operate but what about professional indemnity insurance? Some people can be confused by the differences between the two, so we explain how they are different and why a business would need either insurance cover.

Public liability insurance: about negligence.

Most Australian businesses must have public liability insurance due to contractual requirements. This protects your business against accidental third-party injury or damage that occurs as result of your business activities. It’s designed to cover compensation claims from members of the public, which can include suppliers, customers, clients, and passers-by. You are also covered for injury or damage during a client’s visit to your business or when a member of staff visits your client’s premises.

Public liability insurance protects your company when someone is injured, or property is damaged during, due to, or arising from your business operations. (It’s not the same as products liability insurance, which relates to damage or injury caused by products that you distribute, supply or manufacture.)

Some examples of public liability insurance cases from business.gov.au  that illustrate where it comes into play could include:

• A customer slips or trips due to a spillage or hazard on the floor of your premises sustaining personal injury
• Damage to property owned by a customer whilst it is being held at the business premises
• A spectator is injured at an event that you have organised.

Should a person sue your business, they’d have to prove your business was negligent. APRA’s latest estimated total public liability claims payments by Australian insurance companies for the 2019 financial year sits at $1.32Bn

Professional indemnity insurance: about professional advice

Professional indemnity insurance protects businesses that provide professional services or advice to others.

It’s a financial safeguard for individuals and/or businesses to cover for claims that arise out of any actual or alleged breach of professional duty. For example, a business might have made mistakes or neglected to do something in their professional service.

In other words, it covers your legal costs as well as compensation claims that arise from some failing of your professional advice or service.

However, the purpose of professional indemnity insurance is not to cover your dishonest, fraudulent or criminal acts – that’s an exclusion.

Examples of when professional indemnity insurance would come into play include:

• Not fulfilling your side of the contract due to your negligence
• Giving bad or wrong advice causing financial loss to your client
• Your staff acting fraudulently or dishonestly
• You/your staff defaming a third party (libel – written – or slander – spoken)
• Losing your clients’ documentation
• Unintentionally breaching copyright or confidentiality
• Making mistakes, errors or omissions in providing a service such as improperly auditing a company’s account
• Giving negligent legal advice (if you’re a legal firm).

From the list above, you’ll see that as a business owner, you can be liable for the negligent actions of your employees. Indeed, human error is the top reason for claims against Australian businesses.

Professional indemnity insurance is compulsory before you can legally operate in some industries, and it’s much broader than just the traditional professions of doctor, lawyer, and accountant. You can also find out about your industry’s requirements for such insurance on the business.gov.au website.

The latest total professional indemnity claims payments from APRA’s 2019 figures is estimated to be $1,1.37Bn.

The difference: public and professional

The differences between the two insurances really come down to two words: ‘public’ and ‘professional’.

When members of the public make a claim against your business for injury, illness, or damage, your public liability insurance cover should protect you.

Should a client make a claim against you for your professional mistakes or negligence, your professional indemnity insurance would cover you.

How can Resilium help?

Insurance isn’t one size fits all. Our qualified Insurance Advisers will look at your situation, assess your risks and provide you with insurance solutions designed specifically to suit your particular circumstances. Resilium Advisers are located all across Australia and our ‘Find an Adviser’ tool makes it easy for you to find one closest to you.

The information provided in this article is of a general nature only and has been prepared without taking into account your individual objectives, financial situation or needs. If you require advice that is tailored to your specific business or individual circumstances, please contact Resilium directly.