Professions
The difference between Public Liability & Professional Indemnity
How well do you understand the difference between these two covers?

Public Liability (PL) & Professional Indemnity (PI) are different types of insurance policies and cover different occurrences. Although they both cover allegations made against you and your business, the types of claims they cover vary. Depending on the nature of your business, you may require both, or just one of these policies.  For some professions, these policies can also be combined into one for your convenience, so you may only have one premium to pay.  

Below, we take a look at the coverage under these policies and explain the differences, similarities, and businesses that may need to consider these insurances. 

 

Public Liability vs Professional Indemnity: What do you need to consider?

In deciding whether you need Public Liability Insurance, Professional Indemnity, or both, there are two questions to ask yourself:

  • Do you interact with clients or members of the public in person?
  • Is your business involved in providing a professional service or advice?

If you answered yes to both, then it’s possible you may need to consider both types of insurance. If you answered yes to just one, then keep reading to consider which one you may need…

Public Liability is designed to provide cover  if a member of the public alleges you or your business are legally liable for an injury, or damage to their property. It is designed to assist businesses that have a physical premise, such as an office or store, or have interaction in person with members of the public.

The example most typically used when describing the coverage under this policy is a member of the public slipping and falling at your premises and suing you for an injury they suffer. In reality however, there are many other instances that may result in a Public Liability claim. For example, say you put a sign outside your office about a special offer you’re holding, but don’t end up securing it properly, and the sign falls on someone’s toe just as they’re about to walk into your office. If this individual took legal action against you, you could find yourself facing a Public Liability claim which may include substantial legal bills to defend yourself, as well as out of pocket expenses in having to pay compensation for their injury.

Public Liability is designed to cover you for the cost to defend a claim covered by the policy , as well as cover the cost of compensation you may be required to pay a third party. It is an important cover for businesses to consider holding if they have any interaction in person with members of the public. To learn more about Public Liability Insurance, what it covers and doesn’t cover, you can read our detailed guide on Public Liability Insurance here.

Professional Indemnity Insurance is designed specifically for businesses who provide a professional service or advice. It is designed to cover you and your business if a client alleges your professional service or advice caused them a financial loss. Again, in this instance, PI would help cover the legal fees you incur in defending a claim covered by the policy, as well as compensation you might be required to pay your client. Examples of occupations that may typically be required to hold PI include allied health professionals, accountants, PR agents, and real estate agents. You can find out more about Professional Indemnity, what it covers and doesn’t cover in our detailed guide to Professional Indemnity Insurance for small business owners.

Why was this a Public Liability Claim?

This scenario was a Public Liability claim because it was the shopping centre’s negligence that led to the customer suffering an injury. The injury did not occur as a result of any advice provided to Margaret, but rather it was the responsibility of the owners of the shopping centre to ensure enhanced safety during wet weather.

Now let’s take a look at an example of a Professional Indemnity claim:

Charles, an accountant prepared a tax return for a business client, Mary*, and made an incorrect tax deduction. Mary’s business was actually not entitled to this deduction, so she later received a fine from the tax office, and was required to backpay the amount she’d received in her refund. Mary took legal action against Charles for the financial loss she suffered as a result of this mistake. Charles’s Professional Indemnity Insurance covered the cost to legal fees he incurred to defend his case. He was also required to pay compensation to Mary for a nominated amount.

What’s the benefit of having Public Liability and Professional Indemnity insurance?

Both PL & PI are important covers to hold, although they cover different types of claims that may be made against your business. They are both designed to help cover legal fees (for covered claims) and/or compensation you may be required to pay to a third party as a result of an allegation of negligence against you. Having these covers means if a client or member of the public does seek to hold you accountable for financial loss, personal injury, or property damage, then you may have some financial protection. Such events can wreak havoc on your financial livelihood, so having Professional Indemnity and Public Liability in place may help ensure you don’t have to go into debt or sell your assets to navigate out of such scenarios.

Aon can arrange Public Liability and Professional Indemnity Insurance policies which are tailored to the risks of many industries. Visit our website to find out more about the covers, or to get a quote.

*This is a real life claim story of a client of Aon’s. Names have been anonymised for privacy reasons.