Public liability Insurance, also known as PL insurance or contractor liability insurance, can be essential for contractors who visit clients in person, interact with the public or deal with suppliers.

If any of these third parties is injured or their property is damaged due to your business operations, public liability insurance can protect your business against compensation claims and legal defence fees.

Contractor UK’s preferred insurance partner, Markel Direct, explains what public liability insurance can protect contractors against and who might benefit from this insurance cover.

Do contractors need public liability insurance?

For some contractors, public liability insurance may be required as part of their contract with a client or for their professional body membership.

If you see your clients in person, it’s important to consider protecting your business with public liability insurance. This could involve:

• visiting a client at their offices
• working at a client's premises
• hosting a client at your premises
• hosting a client at your home
• meeting a client in a shared workspace

As a self-employed professional, if you accidentally cause injury to a client or damage their property while with them, they could make a claim against you.

Having public liability insurance and more generally, a comprehensive contractor insurance package can demonstrate your professionalism and improve business relationships.

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What does public and product liability insurance cover?

Public liability insurance covers against claims made by members of the public who interact with your business. These claims can include allegations of responsibility for injury or illness, as well as loss or damage to property that they feel you are responsible for. Public liability also extends to incidents that may result in accidental death.

Often, product liability insurance can come as part of the public liability insurance cover (public and product liability insurance).

Product liability insurance, often included with public liability cover, protects you if a third party is injured or their property is damaged because of a product you’ve supplied.

To summarise, public liability insurance covers:

• Personal injury claims — If someone slips, trips or falls at your premises due to your work or a product you supplied.
• Property damage claims — If you damage someone’s equipment or property during the course of your business activities or if their property is damaged because of a product you supplied them.
• Compensation payouts — Any compensation owed to the injured party or compensation to cover the cost of repairing (or replacing) property damage.
• Legal protection — Covers legal defence costs if someone sues due to injury or property damage caused by your business.
• Medical expenses — Pays for medical fees, medicine and rehabilitation bills claimed by an injured party.

What kind of claims does public liability insurance cover?

Client injury during on-site work

While setting up a network at a client’s office, an ethernet cable left across a hallway causes a client employee to trip and injure their wrist. The injured party claims against you for medical expenses and lost income. Public liability insurance covers your legal fees and compensation costs.

Property damage during hardware installation

Accidental damage occurs when an expensive monitor is knocked over by you while relocating equipment during an on-site server upgrade. The client seeks compensation for the damaged device. Public liability insurance pays for the monitor to be replaced.

Office disruption due to an electrical fault

During the installation of a custom-built PC, a faulty power supply causes an electrical surge that damages other equipment and interrupts business operations temporarily. The client claims for equipment damage and business interruption losses. Public liability insurance covers the payout owed for property damage and your legal defence costs.

Accidental damage activates sprinkler system

While you’re drilling to install a wall rack for networking equipment, a pipe connected to the fire sprinkler system is accidentally pierced. This results in water damage across multiple office floors. The building manager initiates legal action for substantial repair costs. Public liability insurance covers your liability costs and associated legal expenses.

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What does public liability insurance not cover?

• Work related injuries you sustain — In case you are unable to work due to injuries sustained during your business operations, public liability insurance would not cover you. Occupational personal accident insurance would be more helpful in this scenario, providing income support.
• Damage to your property — Public liability insurance covers damage to third-party property, not your own. To safeguard your business property, consider obtaining a specific office and business equipment insurance policy.
• Employee injuries or illnesses — Public liability insurance won't cover claims for employee injuries or illnesses caused by their work. Employers must have employers' liability insurance for these cases.
• Payments of fines or penalties — Public liability insurance excludes coverage for fines or penalties of any type.
• Environmental claims — Public liability insurance does not cover environmental claims.

What is the cost of public liability insurance?

The cost of public liability insurance for contractors in the UK varies from insurer to insurer however, the cost is usually affected by a number of factors. These include:

• The industry you work in
• Business size
• Business nature

Typically, the higher your income and business size, the higher the level of cover you need. The higher your level of public liability cover, the greater the cost. For example, if you have a limit of £1 million, this will usually cost less than having a limit of £5 million.

Certain industries or types of work can increase the risk of an accident happening and therefore increase the cost of public liability premiums. For example, working primarily from home in a desk job and visiting a client's office infrequently is less risky than if your work involves visiting a building site or performing manual labour.

What level of public liability insurance cover do I need?

Public liability insurance typically offers businesses cover limits ranging from £1 million to £10 million. This limit indicates the maximum amount that the insurer will pay if a claim is made against your contracting business.

If a third-party files a claim against your business, you may be required to provide compensation. This compensation might need to cover loss of earnings, medical costs and future care needs. Additionally, you may be responsible for both your legal fees and those incurred by the claimant.

Working out how much cover you may potentially need can be tricky, but to help you estimate, try to think of what the potential worst-case scenario could be for the type of contracting work you do.

Here are some points to consider:

• Client contract requirements: Does your client contract state that you need to hold public liability insurance up to a specific limit?
• Contact with the public: How often in your line of work do you interact with clients or members of the public? Do you deal with clients mostly in person or virtually? Do you carry out any tasks in person that could increase your risk?
• Industry associations and trade bodies: Are you a member of an association or trade body that requires you to have public liability insurance up to a certain level of cover?
• Business size: Do you have anyone working for you? Generally, if your business is larger, the risk is higher.
• Previous insurance claims: Do you have any historic public liability insurance claims? If you have, your insurer may consider your business as more of a risk and increase your premiums.

Do I need public liability if I work from home?

Even if you work from home, it’s usually best practice to have public liability insurance along with professional indemnity insurance. These are usually considered the most vital types of insurance for self-employed professionals.

While you may work at home, having a client visit you just once can leave you vulnerable. You may also still visit clients at their premises occasionally, which again carries risk. Other to this, despite working from home, it may be stipulated in your contract that you need PL insurance.

Does public liability cover subcontractors?

Generally, subcontractors fall into two categories:

• Labour-only subcontractors: work under your control using your equipment and are essentially employees. Usually covered under your public liability insurance. You will also be legally required to have employers’ liability insurance to protect these subcontractors in case of injury or illness.
• Bona fide subcontractors: independent subcontractors working under their own direction and using their own equipment — they will need their own public liability insurance.

If you’re unsure, always check this with your insurer and read through your policy wording.

Is public liability insurance a legal requirement?

Public liability insurance is not a legal requirement. The only type of contractor insurance that is a legal requirement, if you have employees, is employers’ liability insurance. If you have one or more employees in a full-time or part-time capacity, either permanent or temporary, this type of insurance is legally required with a minimum cover limit of £5 million. This insurance covers your liability if an employee of yours suffers an injury or illness in the course of their work for you.

Public liability vs employers’ liability

	Public liability insurance	Employers’ liability insurance
Who is covered?	Clients, visitor, members of the public and any other third parties	Your employees
What it covers	Claims involving: injury during business activities; property damage; injury or property damage caused by a supplied product (product liability)	Claims involving: injury suffered as a result of their work; illness caused by their work for you
Who needs it?	Any self-employed professional, business, group or organisation that interacts with clients, customers or the public	Any self-employed professional, business or organisation that employs staff permanently, temporarily or on a contract basis
Examples of claims	A client visits your office and trips over cables, fracturing their arm; you spill a drink over a client’s laptop	An employee develops back problems due to an inadequate workstation; an employee suffers an injury after lifting equipment
Typical policy limits	£1 million to £5 million	£5 million to £10 million
Do they cover legal defence costs?	Yes, defence costs and compensation are covered up to the policy limit	Yes, defence costs and compensation are covered up to the policy limit

What other types of insurance do contractors need to consider?

Other types of contractor insurance you may wish to consider include:

• Professional indemnity insurance
• Employers’ liability insurance
• Legal expenses insurance
• Directors and officers insurance
• Office insurance
• Cyber and data risks insurance
• Occupational personal accident insurance

Get a quote for contractor insurance today

Clicking this button will take you to a Quote and Buy facility provided and operated by our preferred insurance partner, Markel Direct.