Risk & Insurance
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.

Public Liability claim vs Professional Indemnity claim

To demonstrate the difference in coverage between these two policies, let’s take a look at a claim example under each policy:

Here is an example of a claim for Public Liability:

Margaret was walking down the escalators at a shopping centre, when she slipped and fell. She suffered severe cuts as a result of the fall, as well as a fracture. It had been raining that day, and while there were warning signs, and non-slip mats throughout the centre, the floor was still wet due to customers coming in. Due to the injuries suffered by Margaret, she took legal action against the centre as she believed her injuries were due to the shopping centre’s negligence. 

The shopping centre was required to pay Margaret compensation, as they were considered legally liable for her injuries. Public Liability Insurance held by the shopping centre covered the cost of legal representation for the owners of the shopping centre, as well as the compensation required to be paid to Margaret.

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.

Why was this a Professional Indemnity claim?

This is a Professional Indemnity claim because a claim occurred as a result of professional service provided by Charles. Mary did not suffer an injury or property damage as a result of Charles’s service, but experienced a financial loss which she was entitled to seek to hold Charles accountable for. 
 

Who needs Public Liability Insurance?

As Public Liability helps cover allegations of personal injury and property damage, it is mainly applicable for businesses that have a physical office premise, or operate out of a location where people can visit. However, even if you operate your business from home, you might still meet with clients and/or suppliers when discussing projects and planning, whether this is out in public or at your clients’ offices. If this is the case for your business, then it is also worth considering Public Liability Insurance. 

If you operate your business remotely, provide your service fully online and have no interactions with any members of the public, then you may not require Public Liability Insurance. Bear in mind however, even if you do not have any interactions with members of the public, if your business is involved in the sale, supply or manufacture of products, then you may need to consider Product Liability Insurance, which is often available as a combined policy with Public Liability Insurance.  In helping you decide whether you need this cover, it is worth taking time to speak to a broker who can undertake a thorough assessment of your business, and help you decide whether PL is required for your business or not.
 

Who needs Professional Indemnity Insurance?

As already outlined, Professional Indemnity Insurance is applicable for businesses that provide a professional service or advice. For some professions, it is a mandatory cover to hold. However, even if it is not a mandatory cover for your occupation, it is still an important cover to consider. Every professional service and piece of professional advice you provide has the potential to be misinterpreted, or even be incorrect, and Professional Indemnity can help to safeguard your business’s financial health if you end up with a claim of professional negligence made against you.

 

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.