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

Both professional indemnity and public liability insurance can be very important for many different businesses across a range of industries. Often 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 avoid a professional indemnity vs public liability insurance dilemma for you and your business, we have detailed key facts in this guide you may need to know and examine the difference between the two in detail.

What is Professional Indemnity Insurance? 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 a third party has suffered a loss, stemming from the service or advice provided by your 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. Professional indemnity policies are often a requirement for professionals working in the following industries:

• Finance and legal • Construction and architecture • IT and media • Consultancy and agency work

Here is an example of when you would need this cover: a client engages your firm’s professional services when purchasing a new property which they intend to convert to a block of flats and 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 relief they were not able to claim.

In this example, 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.

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. 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 example, 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.

The Difference Between Public Liability and Professional Indemnity Insurance While both insurance types can provide vital protection for businesses, the main difference here is that cover is down to how a specific claim arises. With public liability insurance, the risk covered is any injury or damage to a third party that occurs from general negligence while 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 its obligations to clients, policy wordings will make clear what is and what isn’t covered on each policy to avoid any crossover.

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

This article has been compiled using information available up to 14/09/22.

*Whilst care has been taken in the production of this document, Aon does not warrant, represent or guarantee the accuracy, adequacy, completeness or fitness for any purpose of the document or any part of it and can accept no liability for any loss incurred in any way by any person who may rely on it. Any recipient shall be responsible for the use to which it puts this document. This document has been compiled using information available to us up to its date of publication and is subject to any qualifications made in this document. *