Do I need Public Liability Insurance?

[scstock]

My annual insurance has come around for renewal and it's quite a chunk of change as usual. My brokers are pushing me to increase our public liability insurance to £5 million, but it's got me wondering if I actually need public liability insurance at all?

We're a Limited Co. that imports pro audio equipment (mainly computer based) from the USA and distributes to retailers, from a small office unit. A small proportion of our sales is customers buying direct from our website. We do not have a showroom. Once in a blue moon a member of the public may come to our office to pick something up of drop an item in for repair.

What is public liability insurance covering me against?

 

[Newchodge]

My annual insurance has come around for renewal and it's quite a chunk of change as usual. My brokers are pushing me to increase our public liability insurance to £5 million, but it's got me wondering if I actually need public liability insurance at all?

We're a Limited Co. that imports pro audio equipment (mainly computer based) from the USA and distributes to retailers, from a small office unit. A small proportion of our sales is customers buying direct from our website. We do not have a showroom. Once in a blue moon a member of the public may come to our office to pick something up of drop an item in for repair.

What is public liability insurance covering me against?

The equipment blowing up and destroying a house?

 

[HFE Signs]

Public liability is the one thing you should always keep, if anything should happen or a freak accident you must be covered. Trim back on cover you may not need but keep your PL

 

[japancool]

The equipment blowing up and destroying a house?

That's presumably product liability insurance, rather than public liability.

 

[JEREMY HAWKE]

I have always thought that it is a waste of time but the day I stop it will be the day that somebody drops a box on a customers head!

 

[Newchodge]

That's presumably product liability insurance, rather than public liability.

I'm not sure. @Frank the Insurance guy ?

 

[Frank the Insurance guy]

What is public liability insurance covering me against?

Public Liability = Injury loss or damage you cause to others and their property
Products Liability = Injury loss or damage your products cause to others and their property

It is the norm for Products Liability to be included alongside Public Liability. I suspect that your premium is therefore for both Public and Products Liability.

Appreciate the products are imported and therefore liability for any injury or loss caused by the product should go back to your supplier/manufacturer. However from a contractual point of view your customer will sue you (not the manufacturer) and you will have to deal with the legal costs etc in dealing with their claim.

If you do no have Products Liability cover, have you the funds/reserves to pay for legal costs if something happens?

You will still be able to then pursue your supplier to get your legal costs etc back but, again, you will incur legal costs (and time/hassle) in trying to get money back from your supplier!

pushing me to increase our public liability insurance to £5 million

The right level of cover is down to what you are comfortable with. If someone was seriously injured and needed 24/7 care for the rest of their life ,a limit of £1m may not be enough. Probability of this is extremely low however. Its up to you to decide what is a reasonable level that you can live with.

wondering if I actually need public liability insurance at all?

There are only 2 insurance policies that are legally required:
1. Motor Insurance
2. Employers Liability Insurance

Public and Product Liability are not compulsory - its up to you to decide whether you want it. You may also find some customers will not trade unless you have it.

My annual insurance has come around for renewal and it's quite a chunk of change as usual.

Did you get some alternative quotes? Most Insurers are increases their rates (particular for Liability cover).

Best way to make sure you are getting a good deal is to get some quotes from an Independent Insurance Broker.

I will be happy to take a look if interested - just let me know,

 

[scstock]

Thanks so much for your replies.

Looking again at the renewal I see that Frank is right, Products & Public Liability are rolled in together, currently insured for £2m. The broker is recommending I increase this to £5m, for an additional premium of £300.

I can understand that if the business had assets in the millions then I would want to insure against losing it. But a business that only has net assets in the tens of thousands would be wiped out - isn't that what limited liability is for?

 

[Financial-Modeller]

There is no connection / proportionality between Public liability cover and assets.

 

[scstock]

There is no connection / proportionality between Public liability cover and assets.

What I'm trying to get at is that if a Ltd. Co. has millions in assets then insuring against these assets being lost to a lawsuit is worthwhile. But if a company has only a fraction of the assets it could be sued for then what is the point?

Does everyone here have Public Liability Insurance?

 

[Financial-Modeller]

I guess the point about limited liability depends if you value your business more highly than the insurance premium.

The question is; why is your broker recommending the increase in cover? The broker's role is to accept your request to insure a certain level of cover and provide a price for insurance.

 

[japancool]

What I'm trying to get at is that if a Ltd. Co. has millions in assets then insuring against these assets being lost to a lawsuit is worthwhile. But if a company has only a fraction of the assets it could be sued for then what is the point?

Does everyone here have Public Liability Insurance?

I don't get it. Even if your company only has tens of thousands in assets, surely paying a few thousand in insurance premium per year is worth it?

 

[scstock]

I don't get it. Even if your company only has tens of thousands in assets, surely paying a few thousand in insurance premium per year is worth it?

But why pay to insure millions in assets that the business does not have?

 

[DontAsk]

Does everyone here have Public Liability Insurance?

I have public and product £1M each and employer £10M. Premiums less than £400 pa, and that includes exporting my products to the US. Your additional premium seems a bit steep. What's the basic premium?

 

[scstock]

I have public and product £1M each and employer £10M. Premiums less than £400 pa, and that includes exporting my products to the US. Your additional premium seems a bit steep. What's the basic premium?

There's no breakdown unfortunately as the combined policy covers Stock, Employer's Liability, Business Interruption, office equipment as well as the Product & Public liability insurance so all I have to go by is that increasing the cover from £2m to £5m will be an extra £300.

 

[Financial-Modeller]

But why pay to insure millions in assets that the business does not have?

Again, you're talking about Public Liability insurance, which is nothing to do with assets or their value.

As Frank explained, the insurance is to cover the cost of claims made by members of the public against you.

You haven't addressed why you have been quoted for higher cover that you haven't asked for?

 

[UKSBD]

Again, you're talking about Public Liability insurance, which is nothing to do with assets or their value.

I think what he is saying is
If the company only has £20k of assets/value it doesn't really matter if someone sues the company for £5m when only insured for £2m as the most the company can lose is £20k

Edit to add: Is it worth paying the premiums to protect the £20k though?

 

[fisicx]

If the company doesn’t have the assets can a claim be made against the directors?

 

[estwig]

Stop it you lot!

Mine lapsed just over a week ago, it's £800.00 a year, I been paying it for over 20 years, never made a claim, or even made an enquiry...........Value for money........Not!

At some point a numpty builder doing a loft conversion, is gonna drop an RSJ right through a house, he'll look to blame anyone but himself, puts me in the firing line!

 

[scstock]

If the company doesn’t have the assets can a claim be made against the directors?

I’m curious - as a web developer, do you have public liability insurance?

 

[WaveJumper]

Its like flying without a parachute get your PL sorted it will seem like good value when someones making a claim against you

 

[scstock]

Stop it you lot!

Mine lapsed just over a week ago, it's £800.00 a year, I been paying it for over 20 years, never made a claim, or even made an enquiry...........Value for money........Not!

At some point a numpty builder doing a loft conversion, is gonna drop an RSJ right through a house, he'll look to blame anyone but himself, puts me in the firing line!

Such is the nature of insurance - you hope you won’t need to claim on it. But whilst I can envisage the circumstances in which I might have to claim for loss of stock or equipment because of fire or theft I struggle to envision a situation where someone would make a claim against us for being physically harmed.

 

[scstock]

I think what he is saying is
If the company only has £20k of assets/value it doesn't really matter if someone sues the company for £5m when only insured for £2m as the most the company can lose is £20k

Exactly - wouldn’t it make more sense from a business point of view to be covered for say £100k? Or is this a moral issue?

 

[ctrlbrk]

The broker is recommending I increase this to £5m, for an additional premium of £300.

Yeah but the broker would say that wouldn't he (no disrespect intended to Frank).

Isn't the bottom line: what is the probability somebody can sue you for injury or loss related to pro audio equipment?

 

[fisicx]

I’m curious - as a web developer, do you have public liability insurance?

No, but I do as a company director. Costs me under £100/year

 

[scstock]

Isn't the bottom line: what is the probability somebody can sue you for injury or loss related to pro audio equipment?

In over 30 years in the industry I’m not aware of a single case.

 

[fisicx]

In over 30 years in the industry I’m not aware of a single case.

Somebody stubs a toe, cuts a finger or does something weird and sues because they can. It might well get thrown out but you would still incur legal costs. Which is why you have insurance.

Maybe look for another broker. @Frank the Insurance guy saved us a bucket of cash.

 

[ctrlbrk]

Somebody stubs a toe, cuts a finger or does something weird and sues because they can.

Stubs a toe on what? A loudspeaker?

 

[Frank the Insurance guy]

The question is; why is your broker recommending the increase in cover? The broker's role is to accept your request to insure a certain level of cover and provide a price for insurance.

Brokers role is to consider the client's "Demands and Needs" - yes, any quote offer should be on the basis requested by the client, but they also would not be doing their job if they did not hi-light any areas of concern (Why they think this is an are of concern is another question entirely!).

I think what he is saying is
If the company only has £20k of assets/value it doesn't really matter if someone sues the company for £5m when only insured for £2m as the most the company can lose is £20k

Exactly - wouldn’t it make more sense from a business point of view to be covered for say £100k? Or is this a moral issue?

The company assets of £20K will only be at risk of the claim exceeded the limit of cover. Therefore if you had a limit of £100K, the £20K would be at risk from £100K and not £2m (Note - No insurer will provide a limit of £100K, most start at £1m).

 

[IanSuth]

Stubs a toe on what? A loudspeaker?

How about, a component goes wrong and they get a huge burst of sound that causes permanent hearing damage impairing their job as a sound engineer - what would the likely costs of that. That is about as extreme as I can think of, so if you are covered for that eventuality ?‍

 

[BustersDogs]

Do you give advice on your products, like installations or anything like that? If you do, and some numpty blows themselves up wiring it in, if you don't have PL how will you pay for your defence? Or pay out if there is liability? Just being able to wipe the company out and leaving someone disabled or widowed is that really how business is done?

Yes I do often see the worst possible scenario in my head...

 

[scstock]

Do you give advice on your products, like installations or anything like that? If you do, and some numpty blows themselves up wiring it in, if you don't have PL how will you pay for your defence? Or pay out if there is liability? Just being able to wipe the company out and leaving someone disabled or widowed is that really how business is done?

so that makes it more of a moral issue.

 

[fisicx]

so that makes it more of a moral issue.

Except lawyers will just consider the law.

Stubs a toe on what? A loudspeaker?

Drops it on their foot because there wasn’t an explicit instruction not to do so. People have won cases like this.

 

[IanSuth]

Except lawyers will just consider the law.

Drops it on their foot because there wasn’t an explicit instruction not to do so. People have won cases like this.

I smashed 2 toes at uni like that.

Me and a mate were meant to be crewing for a small bar gig. He had done a drugs experiment (paid for not illicit) and crashed out so I was trying to do on my own, about 6.00pm I was trying to wheel one speaker cabinet in front of me and pull one behind - each was about 4 feet high, had wheels built into the bottom back corners and a handle /rail along the top back edge, the one i was pushing hit a carpet edge, i gave it a harder shove, it got away from me and the handle came down across my toes ( i was wearing old para boots not toe-tectors)

At about 11.30pm when clearing down the Ents manager asked why i was limping, I took my boot off and he sent me straight to A&E in an ambulance as 3 toes were purple/black. X Ray showed big toe was just bruised but centre 2 I had turned the end phalanges into dust basically.

I still get pain in those toes on cold days now 30 years later - I think I got to miss a couple of gigs (and therefore pay) but no compo

 

[ctrlbrk]

Drops it on their foot because there wasn’t an explicit instruction not to do so. People have won cases like this.

Come on, what is this, the US?

 

[fisicx]

Come on, what is this, the US?

Unfortunately this type of action is now rife in the UK. If you ever have the misfortune to watch daytime TV there are endless ambulance chaser adverts from all sorts of iffy legal businesses.

 

[Australasian]

Hi All .. There is a certain Moral argument to be made for "liability insurance" in case a member of the public or a customer either slips over in your shop (or house) / blows up one of your items after purchase.

the Q is "how much" and also exactly what does the liability cover protect (you personally or the company?

If one thinks that 250K is enuf to compensate someone then leave it at that. Unless the "business" has massive assets then why insure more and more?

I am not expert on this but if someone sues you for (say) 10 million they gotta prove you are negligent and if they win then can only get as much as the business is worth (or maybe your huge house if you are not incorporated)

Any comments?
take Care Jenny

 

[SillyBill]

What I'm trying to get at is that if a Ltd. Co. has millions in assets then insuring against these assets being lost to a lawsuit is worthwhile. But if a company has only a fraction of the assets it could be sued for then what is the point?

Does everyone here have Public Liability Insurance?

I get into these similar wrangles myself and with my broker. I posted recently a topic on brokers about insurance costs. Sometimes you do have to ask yourself who the policy is benefiting truly.

I purchase a Business Interruption Policy every year (almost £30k/yr so isn't cheap) and this past couple of years I've been questionning what is the point? It assumes I'd actually want to stick around in a disaster scenario when the reality is I'd probably prefer to call it a day. At this point in my life, I'd have zero appetite or energy to build my business up again if the place burnt down, which would involve finding a new site (exceptionally difficult), securing the permits (exceptionally difficult), sourcing the plant, equipment, re-finding a place in the market again...sounds like hell even if my insurer paid for the lot. You insure a business very generously when the income into the future matters to you is the conclusion I am arriving at, other than that, may as well trade with risks. My broker looked at me like an alien when I articulated this the year before last. As if playing fast and loose with the family jewels. Just doesn't actually get what is involved in my view if the worst was to happen and why someone might want to walk away than have all that aggro. Ofc doesn't get his commission or fee from no policy either.

 

[DEBS Ltd]

Do you give advice on your products, like installations or anything like that? If you do, and some numpty blows themselves up wiring it in, if you don't have PL how will you pay for your defence? Or pay out if there is liability? Just being able to wipe the company out and leaving someone disabled or widowed is that really how business is done?

Yes I do often see the worst possible scenario in my head...

Providing advice is actually a completely different class of insurance called professional indemnity.

The example you give above would be excluded by a public/products liability policy.

I'm surprised there's a debate over this. I would have thought public/products liability insurance for ANYONE supplying products would be essential. It's not a legal requirement. It's also nothing to do with the company assets.

Ultimately if someone takes you to court because of an injury from something you supply/do and you lose, you're on the hook for whatever the award is.

Should you not have insurance there may be other issues. Could be you've been considered not to act correctly as a director of the company. That's another insurance again (Directors & Officers/Management Liability Practices).

Please don't say "I'm only paying this" as it's not at all comparable in that sense in terms of what one person is paying to another unless you are the EXACT same risk.

 

[macScot]

We were told employers' liability insurance was mandatory (2 directors no employees) when we were trying to get quotes on professional indemnity insurance.

We were not looking to get public liability insurance as we work from home and have no interaction or client visits, the business sells software and we service over the phone or remote support, etc.

However, we got the Public liability insurance as part of the employer liability insurance deal as it was included in the package/price offer and would not have made any difference to the price if we asked for it to be taken off.

Public liability up to £1,000,000 and Employers liability up to £10,000,000 for slightly under £300 per annum.