Why Public Liability Insurance is Essential for Your Business

In the course of running a business, unexpected incidents can occur that lead to financial and legal risks. Whether you operate a small enterprise or a large corporation, public liability insurance is a fundamental safeguard against claims arising from injury or property damage caused by your business activities. 

While it’s not legally required in Australia, why risk it? The majority of businesses choose to have it as a precautionary measure against unforeseen events. 

What is public liability insurance? 

Public liability insurance provides coverage for businesses against claims made by third parties — such as customers, clients, suppliers, or members of the public — who suffer an injury or property damage as a result of the business’s operations. For example: 

• A customer slips and falls on a wet floor inside a retail store, resulting in medical expenses and potential legal action. 
• A tradesperson accidentally  damages a client’s property while carrying out repair work. 
• A business participating in a public event is found responsible for an incident that causes harm to attendees. 

In each of these scenarios, public liability insurance would help cover compensation costs and legal fees, preventing significant financial strain on the business. 

Is public liability insurance legally required in Australia? 

Public liability insurance is generally not compulsory by law in Australia. However, there are circumstances where it is required, such as: 

• Trade licensing requirements: Electricians, plumbers, and builders often need public liability insurance to obtain and maintain their licences. 
• Contractual obligations: Businesses working with government agencies, large corporations, or event venues may be required to hold a certain level of public liability insurance. 
• Lease agreements: Many landlords and shopping centre managers mandate a minimum level of coverage for tenants. 

Even when not required, having public liability insurance is a responsible business decision that can protect against unforeseen financial losses. 

So, no one legally needs public liability insurance, but who should get it? 

Public liability insurance is relevant to businesses across various industries, particularly those that interact with the public or operate in environments where accidents could occur. The following businesses and professionals should strongly consider obtaining coverage: 

1. Businesses with customers or public interactions. If you have customers, suppliers, or visitors to its premises, there is a higher risk of accidents occurring. Retail stores, restaurants, salons, medical clinics, and office spaces with regular foot traffic should have public liability insurance to cover potential claims. 
2. Businesses operating in public spaces. Companies that work in public areas — such as construction firms, event organisers, and market stall operators — face higher exposure to third-party claims. Public events, in particular, present a risk of injury or damage due to large crowds and various moving parts. 
3. Tradespeople, contractors & sub-contractors. Tradespeople frequently work on client premises, where there is a risk of property damage or injury. Many trade licences, such as those for electricians and plumbers, require proof of public liability insurance as part of the licensing process. 
4. Businesses leasing commercial property. Many commercial landlords require tenants to have public liability insurance as part of their lease agreement. Shopping centres, office buildings, and industrial properties often have mandatory minimum coverage levels that tenants must meet before occupying a space. 
5. Businesses manufacturing or selling products. Product liability insurance is typically used to cover claims related to faulty or dangerous products. It can also provide coverage if a defective product causes injury or damage while being used in a business setting. For example, a café serving food that results in food poisoning could face a claim from affected customers. 

What public liability insurance covers. 

A comprehensive public liability insurance policy typically covers the following: 

• Legal liability for injury or death. If a third party is injured or dies as a result of your business activities, public liability insurance covers compensation costs and related legal expenses. 
• Property damage. If your business causes accidental damage to third-party property, the policy will help cover repair or replacement costs. 
• Legal costs. If your business is taken to court over a public liability claim, the policy will cover legal defence fees and settlements. 
• Compensation payments. If a court or insurer determines that your business is liable, the insurance will cover the compensation you are ordered to pay. 

What public liability insurance doesn’t cover. 

While public liability insurance is a broad form of coverage, it does not protect businesses from every type of risk. It is important to be aware of its exclusions, which may include: 

• Injuries to employees. Employee-related injuries are covered under workers’ compensation insurance, not public liability. 
• Defective workmanship. If a job is completed poorly and results in damages, professional indemnity insurance may be required instead. 
• Advertising liability. Claims related to false advertising, copyright infringement, or misleading statements typically require a separate form of coverage. 
• Vehicle-related accidents. If your business vehicle causes an accident, you will need a commercial motor vehicle insurance policy. 
• Intentional acts of harm. Any deliberate harm caused by your business or employees is not covered. 

How much public liability insurance does a business need? 

The amount of coverage required depends on several factors, including the industry, size of the business, level of risk, and contractual obligations. Standard coverage levels range from $5 million to $20 million, with businesses in high-risk sectors typically requiring higher limits. For example: 

• A small café may opt for $5 million coverage to meet lease requirements and customer risks. 
• A construction firm working on large projects may require $20 million coverage due to high-risk work environments. 
• A business hosting large public events may need $10 million or more in coverage to protect against potential liabilities. 

Assessing your business risks and consulting with an insurance advisor can help determine the appropriate coverage amount. 

Looking for public liability insurance? 

Public liability insurance is a key component of risk management for businesses, providing essential protection against financial and legal risks associated with accidents, injuries, and property damage. 

For businesses of all sizes, understanding the level of coverage needed and ensuring compliance with industry standards is essential. Get in touch with us today and take the first step toward a safer, risk aware, protected business.