What’s the Difference Between Professional Indemnity and Public Liability Insurance?

There are circumstances where company only need one or the other

13/09/17

Both Professional Indemnity and Public Liability insurance can be very important for many different businesses across a range of industries.

Often, it can be the case that a company is required to have both types of cover - however there are also circumstances where they may only need one or the other.

To help provide more clarity on this and avoid a Professional Indemnity vs Public Liability insurance dilemma for you and your business, in this guide we have detailed key facts you may need to know about these policies and examine the difference between Public Liability and Professional Indemnity insurance in detail.

What is Professional Indemnity Insurance?

To put this into simple terms, Professional Indemnity insurance can be defined as a policy which is intended to protect professionals and their respective businesses from any claims made against them by a third party. It can also cover the expenses and legal costs of your defence, as well as any damages that might be awarded.

The nature of these claims is often that this third party has suffered a loss, stemming from the service or advice provided by a business. These losses could be from what the third party believes to be a breach of contract, a result of non-performance and/or potential professional negligence.

With this in mind, such policies are a requirement for professionals working in industries where such circumstances could arise.

This can include:

Here is an example of where this cover would be needed:

A client engages your firm’s professional services when purchasing a new property, which they intend to convert to a block of flats and subsequently rent out. During the conveyancing due diligence process, your firm fails to inform the client that they are entitled to multiple-property relief on Stamp Duty. Your client completes the purchase of the property, only to find out 18 months later they would have been entitled to the relief on Stamp Duty (which you only have up to a year to claim), and sues your firm for the amount of the relief they were not able to claim.

In this scenario, your Professional Indemnity insurance would cover the costs and expenses associated with the claim, as well as any legal liability to pay damages to your client. Professional Indemnity cover responds in this scenario as the claim arises from a breach of your professional duty.

What is Public Liability Insurance?

A Public Liability insurance policy is something which, as the name suggests, can protect a business from any claims that are made against it by a member of the public, but also it protects against claims from customers and clients. These are often compensation claims which can come from a person, or persons, who believe they have been injured or their property has been damaged in some way because of an incident on a business premises or an event they have organised.

Not only can a Public Liability insurance policy help protect a business against these claims, it can also provide cover for potential legal fees and medical expenses that could be incurred as a result.

This insurance can be for any business or company where there is a potential risk of injury, or even death, to a member of the public or a customer, because of its operations. This can be more apparent for certain industries including different trades, those working in supply and logistics and those who regularly meet with and host clients.

Here is an example of when you would need this cover:

A client visits your premises for a meeting with a senior partner to discuss an ongoing legal matter. Whilst on the premises, the client slips on a wet floor which has recently been cleaned, sustaining an injury to their leg. The client decides to make a claim against your firm for the physical injury they have sustained, alleging negligence because the wet floor was not properly signed and no steps were taken to reduce the risk of slips and trips.

In this scenario, your Public Liability insurance would cover you for the costs and expenses associated with defending the claim, as well as any legal liability to pay damages to your client if you are found to have been negligent. Public Liability cover responds in this scenario, as the claim arises from a breach of your duty of care to your client, and constitutes a civil wrong.

The Difference between Public Liability and Professional Indemnity Insurance Explained

When we examine the two above descriptions of what these policies involve, it is clear to see that there are some key differences, as well as similarities.

While it is apparent that both of these insurance types can provide vital protection for businesses, the main difference here is that cover is down to how a specific claim arises.

To summarise, with Public Liability insurance, the risk covered is any injury or damage to a third party seen to occur from general negligence in the course of running a business. This liability stems from the general duty of care a business needs to undertake under common law.

Professional Indemnity insurance however, applies when the service or advice provided to a third party from a business could be seen to be incomplete, or work which can be seen to have failed to fulfil original intentions, ultimately, representing a breach of a business’ professional duty to make sure this is not the case.

Whilst these covers are similar in that they both cover your business in it’s obligations to clients, policy wordings will make clear what is and isn’t covered on each policy to avoid any crossover.

Further Information

With the above information, you should hopefully have a much better idea of what is involved with Public Liability and Professional Indemnity insurance and how these differ.

For further information on the issues covered by this article, visit https://insurance.aon.co.uk/business-insurance/professional-indemnity

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