Liability insurance protects you against financial loss if your actions, your negligence, or the condition of your property is found to cause a person to be injured, or a person’s property to be damaged or destroyed, or they suffer loss as a result of relying on your services or advice.
Third-party legal liability or Public Liability arises from the concept that every person in the conduct of his affairs owes to every other person duty of reasonable care. For example, suppose there is a failure in his duty, and the failure results in bodily injury or damage to the property of any person. In that case, the person failing in his duty is answerable for damages to the aggrieved person.
Property owners, for instance, owners of cafes or cinema houses, are liable to compensate their guests or audiences as the case may be if bodily injury, death, or damage is caused to their belongings or due to the carelessness of their employees. This liability of property owners is covered under public liability insurance.
What does Public Liability Insurance Cover?
Public liability insurance covers the costs of third-party injuries and damage claims to your business. This includes incidents at your business and locations related to your work, such as a client’s home.
As this fall under a comprehensive general liability insurance policy, if a customer or member of the public injures themselves on your property, your public liability insurance policy would cover the cost of bodily injuries, property damage, and legal costs for any related lawsuits within your policy limits, after you meet your deductibles.
This type of insurance would also cover accidents caused by yourself or an employee while visiting a customer’s property. However, it does not cover injuries or damages to yourself, your business, or your employees.
Sum Insured Under a Public Liability Insurance
The Public Liability Insurance Act, 1991, provides that the indemnity limit for Any One Accident should not be less than the paid-up capital of the undertaking and not more than the amount, as may be prescribed by rules framed under the Act.
The rule currently stipulates that the insurer must pay no more than Rs 50 million for any accident and no more than Rs 150 million for any year.
Premium Under Public Liability Insurance
The premium charged depends on two factors:
- Limit of indemnity selected,
- Annual turnover of the business.
Exclusions in Public Liability Insurance Policy
This insurance policy does not cover liability arising from willful or intentional non-compliance with statutory provisions for fines and penalties.
Bottomline: Public Liability Insurance Should be taken by all Business Types and Sizes
If you interact with the public during your business, no more than Rs 50 million for any one accident and no more than Rs 150 million for any action for injury to third parties or damage to their property as a result of your business activities or while using your product or service.
You may still have to pay legal costs even if you’re not at fault. Public Liability Insurance can cover reasonable legal fees for you from willful or intentional non-compliance in any business, whether industrial, manufacturing, trading, or service oriented. The company’s size doesn’t matter, as any business may have some hazardous factors that may pose risks to the public. It is always prudent and suggested to insure against possible losses towards third parties and the public. The cost of the premium would always be less compared to the benefits under such an insurance policy.