Is professional indemnity the same as public liability?

In the intricate landscape of business insurance, distinguishing between professional indemnity and public liability insurance is crucial for every business owner. A lot of people think that these policies essentially cover the same thing but in reality, they are very different.

While professional indemnity insurance guards against claims from clients due to negligent services or advice, public liability insurance covers injuries or damages to third parties related to your business activities.

These insurances are cornerstones of a robust risk management strategy, serving distinct, vital roles in protecting your business.

Is professional indemnity the same as public liability? The short answer is no, and you’ll likely need both.

What is professional indemnity insurance?

If you give advice or services as part of your business (and there are very few businesses that don’t!) then you probably need professional indemnity insurance. This cover protects you and your business financially against claims that result from allegations of negligence or breach of duty. These will have occurred as the result of an act, error or omission while carrying out your professional duty.

Professional indemnity insurance is important because it protects your reputation by giving you the means to defend yourself against claims and gives you overall financial peace of mind.

With some professionals, such as lawyers and doctors, professional indemnity insurance is compulsory. In most other cases, it simply makes good business sense to have this cover in place.

Having this insurance is not just about risk management; it’s a mark of credibility and reassurance for your clients.

What is public liability insurance? 

Public liability insurance is designed to protect you and your business financially if your business actions result in injury to a person or damage to property. It also covers the costs involved with legal bills if you need to hire a lawyer during the claims process.

Even if you always take every precaution during your work activities, it’s all too easy for accidents to happen and a claim could occur as the result of something as simple as a member of the public tripping over on your work premises or one of your employees accidentally damaging client property while completing a job. The costs involved if you’re found liable following a claim can be substantial which is why it’s essential to have public liability insurance in place.

Many employers won’t be keen to take you on if you don’t have liability cover in place and clients will also often ask about your liability cover. It also means you can be confident that you’ll be able to cope financially if you’re on the receiving end of a claim.

This insurance is vital for any business that interacts with the public, whether you operate from a physical location that customers visit, conduct business at client sites, or participate in external events.

Public liability and professional indemnity: key differences

Both insurance types are designed to protect businesses against financial losses stemming from claims made against them. They cover legal costs and compensation, and provide a safety net that allows businesses to operate with confidence, knowing they’re protected against certain risks.
They are also both fundamental to a comprehensive risk management strategy, reinforcing your business’s credibility and trustworthiness in the eyes of the clients and the public./span>

See the key differences below.

Coverage

Professional indemnity insurance is designed to cover claims related to professional services or advice. Public liability insurance covers claims of physical personal injury or property damage to third parties due to your business activities.
Consider a software development firm that creates a customised inventory management system for a retailer. Due to a coding error, the system miscalculates stock levels, leading to significant sales losses. The retailer sues them for professional negligence. Here, professional indemnity insurance would cover the legal costs and any compensation required to rectify the financial loss suffered by the retailer due to the advice (or, in this case, the software provided) given by the firm.

Alternatively, a yoga studio may have just had its floors mopped and been left slippery after cleaning. A client slips, falls, and sustains a serious injury that requires medical attention and rehabilitation. If the client sues the studio for failing to maintain a safe environment, public liability insurance would cover the studio’s defence costs and any compensation awarded to the client for their injury and related losses.

Purpose

The core purpose of professional indemnity insurance is to protect against the financial implications of failing to provide the promised professional standard or service. Public liability insurance aims to shield a business from the repercussions of accidents or mishaps that occur on its premises.

For example, a financial advisor might recommend a specific investment that results in a substantial financial loss for a client. The client claims the advice was not in line with their risk profile. Professional indemnity insurance protects the advisor against claims of providing incorrect advice or service.

On the other hand, a company working at a wedding might accidentally spill hot soup on a guest, causing burns. The guest’s claim for medical expenses and suffering is covered by the caterer’s public liability insurance, which addresses accidents and injuries to third parties involved with the business.

Target audience

Professional indemnity insurance is crucial for professionals and businesses that offer advice or services, such as consultants, architects, and financial advisors. Public liability insurance is essential for any business that interacts physically with the public, like retail stores, cafes, and construction companies.

Why understanding the difference matters

• Risk management: Tailoring your insurance coverage to match your specific business risks ensures comprehensive protection.
• Financial implications: Choosing the right type of insurance, or a combination of both, safeguards against financial liabilities. A misalignment here could expose your business to unforeseen expenses.
• Compliance and legal requirements: Certain professions may legally require professional indemnity insurance, while public liability insurance is often necessary for contractual reasons, especially when physical interaction with the public is involved.

Get your professional indemnity and public liability sorted

While it’s true that both professional indemnity and public liability cover protect you financially against claims by third parties, as well as covering legal bills, they offer cover for different things which is why your business likely needs both in place.

If you’re looking for public liability or professional indemnity insurance Australia, GSK Insurance Brokers will help find the right insurance package for your situation. We take the time to analyse the risks you face in your day-to-day work so you can feel confident that you have the right level of cover in place, whether you’re after a small business insurance package or a courier insurance package. Contact us today and let us protect your success!