WHAT’S THE DIFFERENCE BETWEEN PUBLIC LIABILITY VS PROFESSIONAL INDEMNITY?

When organising business insurance, it can often feel like a minefield of jargon and fine print. Two terms that frequently pop up and often cause confusion are Public Liability and Professional Indemnity insurance. While both protect your business from potential legal and financial risks, they serve very different purposes.

Understanding the difference can help you avoid costly mistakes and ensure you’re properly covered if something goes wrong.

What Is Public Liability Insurance?

Public Liability Insurance covers your business if a Third Party (e.g. a member of the public, a customer, or a supplier suffers injury or property damage where you are found to be at fault due to your business activities.

A substantial number of Public Liability claims are for third party injury, the policy will respond to medical and legal cost where you are found to be at fault for the event.

Some examples of how this insurance cover would respond include:

• Shop Owner: A customer walks into your clothing store, slips on a freshly mopped floor that has no warning sign in place and breaks their wrist. They sue you for medical costs and loss of income.

• Builder: While drilling into a wall during a renovation, a builder hits a pipe and causes water damage to the client's home.

• Cafe Owner: A customer has an allergic reaction to a dish that was incorrectly labelled, they’re hospitalised and take legal action.

The Public Liability would respond in these instances, the insurer will assess the circumstances of the event and determine whether you are liable, the policy will cover the necessary cost accordingly.

Even if you run a low risk business such as a consultancy office, accidents can still happen. If your business interacts with any Third Parties, Public Liability is a critical safeguard.

What Is Professional Indemnity Insurance?

Professional Indemnity Insurance covers your business if a client when a client suffers financial loss due to professional advice, services, or omissions, and they decide to take legal action against you.

PI insurance is a safety net against legal costs and damages against your business in the event of a claim.

Some examples of how this insurance cover would respond include:

• Architect: An architect provides flawed structural drawings for a commercial building. The mistake is discovered mid construction, leading to delays and costly rectifications - the developer takes legal action against you to recover these costs.

• Accountant: An accountant incorrectly files a client’s tax return, resulting in late penalties and an audit -the client sues for financial loss.

• Property Valuer: A property valuer overstates the market value of a commercial property, which the buyer uses to secure financing. When the true value is revealed, the lender and buyer suffer financial losses and take legal action against the valuer.

Unlike Public Liability (which covers physical injury or property damage), Professional Indemnity protects against claims of financial harm caused by errors, omissions, or poor advice. It can also be a contractual obligation to carry this insurance when tendering for work where advice related activities are involved - so it might be necessary for you to have this insurance.

Even if you're not found liable, defending a Professional Indemnity claim can be costly and time consuming, having an appropriate insurance policy in place can absorb these costs.