Public Liability vs Professional Indemnity Insurance

Public Liability vs Professional Indemnity Insurance: What is the Difference?

When you are insuring your business, the difference between policies can be confusing. As such, you must take the time to understand some of the main options. We’ve written this comparison of Public Liability vs Professional Indemnity Insurance to help.

Public Liability vs Professional Indemnity

What is Public Liability?

Public Liability covers claims for injury or damage from members of the public. For example, a client trips over your laptop bag or a cable and breaks their ankle.

What is Professional Indemnity?

Professional Indemnity Insurance provides cover for costs of claims of professional negligence. For example, a client claims you have provided inadequate advice or services. As such, they accuse you of breaching your professional duty of care. Your insurance covers both legal costs and compensation up to your indemnity limit.

Do I need Public Liability, Professional Indemnity, or both?

Whether a business needs both PI Insurance and PL cover depends on the business itself.

A business with no contact with clients or the public may feel that they do not need Liability Insurance. For example, a home-based web designer may only take meetings online. In which case the risk to the public is low. Were that same designer to take meetings in person, the risk increases.

Typically, a home insurance policy will include a Public Liability policy. But, this may not extend to business-related incidents. Therefore, it is important that those operating home businesses speak to their provider.

So, suppose this home-based web designer decides not to take out a separate business PL cover. Meanwhile, that same web designer is providing professional advice or expertise to clients. As such, they have a duty of care as an expert in their field and may be liable for losses. It would be wise for a consultancy such as this one to take out Professional Indemnity cover.

As mentioned, your home PL and contents cover might extend to home-business activities. However, professional indemnity will likely need a dedicated business insurance provider.

Service professionals like consultants will provide advice and come into contact with the public. In these circumstances, both covers come highly recommended.

Public Liability vs Professional Indemnity: Are they compulsory?

Neither Public Liability nor Indemnity Insurance is a legal requirement for most businesses. In some cases, many medical professionals need medical indemnity. However, there is not a universal requirement for businesses to have this cover.

Still, you may find that either, could be a contractual requirement.

For example, suppose you are contracting to a larger firm. In that case, they will often ask all sub-contractors to have one or both types of cover.

Public Liability vs Professional Indemnity: Which is the most expensive?

The levels of exposure in your work generally determine the cost of your cover. Let’s look at a couple of examples:

• A kitchen design and installation business may benefit from both PL and PI. Mismeasuring the room or a faulty design would be a PI claim. Whereas drilling through a pipe while putting up a cabinet is a liability claim.

• A Chartered Surveyor provides advice on building valuation or construction issues (PI risk). They also visit sites (PL risk).

Public Liability vs Professional Indemnity: Do you need Run-off Cover?

Professional Indemnity cover comes on what is known as a “Claims Made” basis.

This means that you need the policy to be active both when you carry out the work and when a claim is made.

Depending on the type of business, some PI claims can take several years to raise their head. As such, it is advisable to purchase run-off cover for some time after the work has finished or you have retired. After you cease trading, run-off policies may be necessary for over seven years.

Alternatively, public liability comes on a “Claims Occurring” basis. In this circumstance, you only need cover in place while the work is being carried out. Indemnity for any subsequent reported loss will fall on the insurer at the time of the incident.