Public Liability Insurance: What It Covers and Which One Is Required

Three different covers get called liability insurance in ordinary conversation, and a contract asking for one will not accept another. Getting the distinction right is most of the work.

The three covers, and what separates them

Public liability covers injury to members of the public or damage to their property arising from your business activities. A customer tripping over your toolbag, a dropped item damaging a client's floor, a ladder through a window.

Employers liability covers injury to your own employees. In the UK it is compulsory for almost any business with employees, and the certificate must be displayed or accessible. It is a legal duty rather than a commercial choice.

Professional indemnity covers financial loss caused by your advice or professional work being wrong: a mis-specified design, a negligent report, faulty accounting. It responds to a mistake in the work product rather than to physical damage.

A trade that gives advice as well as doing physical work may genuinely need all three, and a contract may require specific limits on each.

Who is actually asking, and for how much

Commercial clients, local authorities, main contractors, landlords, event venues and marketplaces routinely specify a minimum indemnity limit as a condition of working. Where they do, the limit is not your assessment of the risk. It is a contractual requirement.

Read the requirement precisely. There is a difference between requiring public liability at a figure and requiring public and products liability, and between requiring employers liability and accepting a declaration that you have no employees.

Getting the certificate wording to match the contract wording avoids the most common delay in onboarding with a large client.

What the limit means, and per what

An indemnity limit is normally per claim rather than per year on public liability, which is more generous than it sounds. Check it, because some policies aggregate across a period and that changes the exposure considerably.

Defence costs may sit inside or outside the limit. Inside means legal costs erode the money available to settle, which on a marginal claim matters.

An excess applies to property damage claims more often than to injury claims, and it can be sizeable on trades working in occupied premises.

What public liability does not cover

Your own property and your own tools. That is a separate business-equipment cover, and the confusion is common enough to be worth stating plainly.

Faulty workmanship itself. Public liability responds to damage caused by your work, not to the cost of redoing work that was done badly. A leaking pipe you fitted may cause covered water damage and an uncovered cost to refit the pipe.

Deliberate acts, work outside the described activities, and work at heights or in locations the policy excludes. The description of your business on the schedule is doing real work here: a tiler who takes on a roof is operating outside it.

Getting the trade description right

The activities listed on the schedule define the cover. A generic description chosen from a dropdown because it was closest is the most common reason a claim is queried, and it is entirely avoidable.

Where your work has changed — new services, a different type of premises, work at height, hot works — tell the insurer. Mid-term changes are ordinary and cheap.

If you subcontract, say so. Cover for your own labour does not automatically extend to subcontractors, and the liability position for their work is a specific question rather than an assumption.

How to buy it

Collect every contract requirement first and take the highest limit demanded rather than buying the minimum and topping up later. Then describe the trade precisely, add employers liability if you have anybody working for you at all, and add professional indemnity if you give advice.

Check whether defence costs sit inside the limit, and check the property damage excess. See cover for the premises themselves, the vehicle and tools side and the clauses common to every policy.

Claims-made against occurrence, and the gap when you stop

Public liability is normally written on an occurrence basis: what matters is when the incident happened, so a policy in force at the time responds even if the claim arrives years later. Professional indemnity is usually the opposite: written on a claims-made basis, where what matters is having a policy in force when the claim is made, regardless of when the work was done.

That difference creates a trap at the end of a business. Stop trading, cancel a claims-made policy, and a claim about work done five years ago has nothing to respond to. The answer is run-off cover, which keeps the claims-made policy alive for a period after the work stops, and it is the thing most people closing a consultancy have never heard of.

It also matters when changing insurer. A claims-made policy needs retroactive cover back to the date you started doing the work, and a new policy with a recent retroactive date leaves everything before it uninsured. Ask for the retroactive date explicitly and check it against when the business began.

For the physical trades this is mostly academic, because occurrence cover behaves the way people intuitively expect. For anyone giving advice it is the single most consequential detail in the policy.

Frequently asked questions