What is Public Liability Insurance and What Does it Cover?

Public liability insurance is not compulsory in Singapore, but there are some very compelling reasons to consider getting coverage nonetheless. Here’s what businesses need to know about public liability insurance. 

If you have a customer-facing business that operates from a physical location — such as a shop, restaurant or clinic — you probably rely on your customers coming and going all day long. 

Such interaction with the public is necessary and inevitable, but it also exposes you to public liability risk. This means that should someone experience an injury or loss while visiting your premises, you may have to pay damages. 

To ameliorate this risk, businesses can apply for public liability insurance. Let’s take a closer look at what public liability insurance is, how it works, and what types of businesses should consider taking up such a policy. 

What is public liability insurance, and how does it work?

Simply put, public liability insurance is insurance that covers you against any claims from the public for damage, loss, injury or death arising from an incident that took place at your place of business. 

For example, let’s say you own a fashion store, and one day a customer slipped and fell while browsing in your store. 

As a result, she suffered a fracture in her tailbone, rendering her unable to continue her work as a spinning class instructor (she’s not able to get on the bike and peddle). 

Because broken tailbones can take up to three months to heal, she decides to sue your store for loss of income. As the proprietor and owner, you’re therefore named in the suit. 

Assuming you lose the case in court and are found liable, you’ll have to pay the customer damages as determined by the court. 

This compensation will have to come out of the company’s account, or maybe even your own pocket. 

But however, if you have public liability insurance, your insurer will pay the damages on your behalf instead. This can save you from an unnecessary financial loss.

When does public liability insurance trigger?

Of course, payouts aren’t automatically triggered every time a member of the public brings a suit. Like all insurance policies, public liability insurance only triggers when pre-determined covered conditions are met. 

Let’s return to our unlucky spin instructor. During investigations, it was revealed that she fell down only because she slipped on the ice cream cone that she dropped in your shop (don’t judge, it was her cheat day). 

Therefore, the fall, while preventable, was entirely a consequence of her own doing. She herself brought the ice cream cone into your shop, dropped it on your floor, and then slipped in it.

In other words, you and your shop are not responsible, and therefore not liable for the damages she is claiming. Hence, the customer’s claim against you fails, and your public liability insurance will not pay out

What does public liability insurance cover?

There are three main areas of coverage provided in public liability insurance, as follows:

• Death and/or bodily injury suffered by a member of the public
• Property damage to a third party 
• Legal costs

The above is non-exhaustive; some policies and insurers may cover some or all of these, while others may also bundle in other related benefits, such as employee insurance.

It’s important to note that like with any other insurance policy, public liability insurance is governed by a strict set of restrictions and exceptions. 

A notable one is that employees are not covered, only members of the public. Hence, you should be sure to also get employee insurance in case they suffer a workplace injury, but that’s a topic for another article. 

It’s a good idea to thoroughly check the list of exclusion and restrictions of the public liability policy you are considering so as to eliminate any gaps. 

And if you’re unsure of the type of policy you actually need, or wish to cover unusual scenarios, it’s best to consult a licensed general insurance professional. 

Who should take up a public liability insurance policy?

As a general rule, if your business interacts with members of the public, or relies on them visiting your premises, you should get a public liability insurance plan. 

Also, your landlord may insist you get an adequate public liability insurance policy as a prerequisite for leasing you the shop unit. 

As well, clients in some cases may also require you to have public liability insurance before they can engage your services. 

In particular, there are some business activities and commercial operations in which public liability insurance is likely to be a default requirement, such as the following:

• Construction work
• Interior renovation and decoration work
• Engineering and inspection
• Supply of labour and manpower
• Leasing commercial space or property
• Hosting of public events   

Besides public liability insurance, what other liability insurance plans should I consider?

You may notice that public liability insurance is rather narrow and basic, especially when you consider the myriad ways which customers or members of the public might experience injury or loss involving your products or services. 

Hence, for a more complete coverage, consider these other types of liability insurance.

Product liability insurance

This is a type of insurance policy that covers bodily injury or property damage incurred through the use of the product manufactured, distributed or sold by your company. 

For instance, if you are the sole distributor of a brand of earbuds that were proven to cause hearing damage even under normal use, you could be named as a defendant in a class-action lawsuit. 

Product liability insurance would cover any such claims against you. 

Professional indemnity insurance

No matter how experienced you or your staff are, mistakes could still occur that might lead to injury or loss. 

As an example, imagine a doctor misdiagnosing a serious condition, which worsened a patient’s chances of recovery and caused them to require more invasive and costly treatments. 

If the patient sues and wins, the doctor can activate his professional indemnity insurance benefits to settle the damages.

Directors and officers liability insurance

Directors and officers liability insurance is specifically used to protect individuals from losses if they should be sued as a result of serving as a director or officer of a business, commercial operation or any other type of organisation.

This type of liability insurance can also be used to cover the legal costs involved in such proceedings.  

Cyber liability insurance

This insurance policy is especially important given the prevalence of data breaches and cybercrime in the business landscape today. 

Cyber liability insurance covers an organisation against legal costs and damages arising from a data breach — it can be used to pay for damages awarded to customers who suffered identity theft and other losses due to a hack performed on your company’s database.

These types of liability insurance policies also cover the costs of credit and identity monitoring services as well as other recovery actions required after a data breach.  

Read these next:
A Guide To Business Insurance For SMEs (And How Much They Cost)
7 Sources Of Capital For Business Owners In Singapore
Best SME Business Loans In Singapore (2021)
Employee’s Insurance Benefits: What Should Your Company Be Giving You?
Freelancers And Homemakers, Should You Tag Onto Your Working Spouse’s Company Insurance?