Public liability insurance protects a business if a third party, like a customer, claims they were injured or have property damage because of the insured business. In the U.S., public liability is an older form of liability that most insurance companies no longer offer, having rolled its coverage into the broader commercial general liability (CGL) policy. However, there may be situations where you can still purchase it.
How Public Liability Insurance Works
Public liability insurance, just like it sounds, was created to offer protection for businesses from claims of negligence made by members of the public. Its focus is specifically on two areas: bodily injury and property damage. However, because it is liability coverage, it will also cover the legal defense, settlements, court fees, and damages if the claims end up entering litigation.
What Public Liability Insurance Covers
Public liability insurance is very narrow in its focus and only covers bodily injury and damage to property. It is also limited to a business’ physical location, so it’ll only cover the loss if it took place on the business’ premises. This limitation applies to businesses with off-premise operations, like a trade that works on a customer’s property.
For example, someone in your store slips and falls on a wet spot and is injured. The policy would cover any medical expenses for that injury. If you’re sued for additional damages, the policy would also cover defense costs, court fees, settlement costs, and damages.
Or, let’s say that you have a coffee business and a customer comes in with an expensive purse. While they’re dining in, another customer trips and accidentally spills coffee all over the purse. The public liability policy would cover the cost of damages to that purse.
What Public Liability Insurance Doesn’t Cover
Losses that go beyond bodily injury and property damage that happen at a business location do not fall under the purview of public liability insurance.
Below are the main types of claims not covered by public liability insurance:
- Reputational harm: Covered by the personal and advertising injury coverage component of general liability insurance
- Employee injuries: Covered under workers’ compensation insurance
- Injuries due to products or completed operations: Covered by the product-completed operations coverage component of general liability insurance or standalone product liability insurance
- Claims of professional negligence: Covered under professional liability insurance
- Injuries due to alcohol consumption: Covered by liquor liability insurance
What should be noted is the majority of the above exclusions are either part of a general liability insurance (CGL) policy or available as an endorsement on a CGL.
General Liability vs Public Liability Insurance
General and public liability insurance policies are similar in that they’re both business liability coverages that help your business by defending and settling claims of negligence. The main differences are in the details and scope of coverage.
General liability insurance is more expensive but offers broader coverage. Most general liability policies carry the following coverages, and these are not present in public liability insurance:
- Product liability
- Damages to rented premises (similar to commercial property)
- Personal and advertising injury
General liability insurance is also not limited by location. If someone is injured in their home by an employee of a business, general liability insurance would cover that claim—public liability wouldn’t because the injury didn’t take place at the business’ physical location.
Public Liability Costs
Public liability insurance is inexpensive and less costly than general liability insurance. Across various industries, due to the coverage limitations, public liability insurance will usually be around 10% less than general liability insurance. The biggest challenge will be to find an insurance company that offers it.
When determining the premium, companies will factor in many of the same data points used for general liability premium calculations. These include:
- Size of the company
- Annual revenue
- Operational risks
- Hours of operation
- Claims history
- Limits and deductible of the coverage
If you are having trouble finding public liability or would like the broader coverage afforded by general liability, that doesn’t mean purchasing a CGL will break the bank. Many companies, like Next Insurance, offer policies that start at around $11 a month, and you can check out our rundown of the cheapest general liability insurance companies for options.
Who Public Liability Insurance Is Right For
Ultimately, given the limitations of public liability insurance, it should only be purchased by businesses that need to save money. As a qualifier, the business should have mostly on-premises risks and no exposure to potential personal and advertising claims. Overall, this coverage will be better suited for businesses with physical locations.
Below are some business types that public liability insurance would be good for:
- Coffee shops
- Retail stores
- Grocery stores
- Hotels, motels, and bed and breakfasts
- Dry cleaners
How to Buy Public Liability Insurance
To purchase public liability insurance, your best bet will be to reach out to a broker. Because brokers work for the customer and have connections with multiple carriers, they will usually be the best bet for finding any type of specialty insurance.
However, if you’re thinking that general liability coverage may be a better fit for your business, check out our review of Simply Business. It is an online broker that will work for you to find coverage online from other providers and generate online quotes in minutes, letting you compare cost and coverage and purchase a policy in about 10 minutes.
Frequently Asked Questions (FAQs)
Premises and public liability are similar but are not the same thing. Premises liability insurance is purchased for a property that has little risk exposure but needs some type of protection, like a piece of vacant land. Meanwhile, public liability can be purchased for an operating business.
Public liability is an older form of general liability that predates the general liability policy. Most companies today offer general liability because it is better coverage. It also has become a coverage that will be tailored to specific industries. For example, garage keepers will be included in general liability for autobody shops. Additionally, companies created a business owner’s policy (BOP), which is a combination of commercial property and general liability insurance.
Public liability insurance cost is difficult to determine because it is very hard to find a provider offering it or sharing quotes online. A general rule of thumb is that it will cost about 10% less than general liability because the coverage is much more limited.
Public liability insurance can be a low-cost alternative to business insurance, such as general liability coverage. Though its protection isn’t as robust, public liability will still protect your business from claims made by third parties for bodily injury or damage to property that they own. The challenge will be finding a company who sells it.
However, if after reading about public liability you’ve determined that general liability is a better fit for your business, then check out online broker Simply Business to compare quotes and purchase a policy.