Public and Products Liability Insurance

Unfortunately, no matter how much you plan in business, unpredictable events can happen and these events can put your business at risk.

This is why businesses must consider Public and Products Liability Insurance as a bare minimum. This is the case no matter what the industry – retail, manufacturing, importing, construction or professional services. Yes, even consultants should carry Liability Insurance to protect them from any damage that may occur in connection with their business.

Public Liability (often referred to as Legal Liability or Third Party Liability) protects you from costly litigation following an allegation of negligence involving your company’s product, staff or business activities, which contributed to an injury or caused damage to property of a third party.

Products Liability generally goes hand in hand with Public Liability, and represents an important feature. It provides protection for liability associated to the sale of products. Current laws in Australia generally deem the importer of a product responsible where the manufacturer isn’t locally represented, even though you didn’t manufacture, alter or otherwise modify the product.

As a general rule, a $10million liability limit is viewed as the “normal” limit in Australia. Anything less is deemed to be inadequate and may leave your personal assets exposed if you are sued by third parties. The difference in price between $5million and $10million cover is in many cases less than 20%, so is well worth the extra investment.

Courts take into account the extent of property damage and impact on the life of the injured party when determining a final payout figure. Consider a fire in your building started by a staff member making lunch. It proceeds to burn down several neighbouring businesses. Courts establish negligence as the appliance responsible had not been tagged and approved.

It is recommended when setting your sum insured that you consider your contractual obligations, customer size/exposure. A typical professional services business has trip and fall exposures for any guests that attend their premises, and product liability responsibilities for any food and drink supplied, whereas a large manufacturing outfit may have greater liabilities to a retailer who distributes their product, in the event a customer is injured or has their property damaged.

In this case, the manufacturer may have agreed under contract to protect the retailer in such circumstances e.g. pay for any legal costs it incurs in defending any claim, or pay daily damages until the case is finalised. Such commercial obligations can often fall outside the scope of an insurance policy, as insurers are only looking to cover claims their insured is responsible for at law – whereas a contract will attempt to capture everything.

An astute insurance adviser will assist in reviewing any agreement prior to execution and highlight any areas that need to be addressed relative to their client’s policy. It is always accompanied by a recommendation to also have a lawyer look at it.