It’s important to understand the difference between Professional Indemnity and Public Liability insurance as the two types of cover can often cause confusion. Whilst both covers protect your business against legal action they offer different forms of protection.
Public Liability insurance protects you and your business against the financial implications if you are found liable for loss or damage to other people’s property, or cause illness or injury that is not covered by the Accident Compensation Commission (ACC).
Professional Indemnity insurance is designed for professionals who provide advice or a service to their clients. If someone alleges that you’ve made a mistake, overlooked a critical piece of information, misstated a fact or they have misinterpreted you in the course of your work resulting in a financial loss for your client, they may take legal action against you to recover those losses. Whether or not the allegation is true,
The risk of a claim being made against you isn’t always determined on your skill or level of professionalism. There is always the risk of an unhappy client making a claim against you.
A Public Liability claim could result from
- Accidental damage to a third party’s personal property
- A faulty or defective product that you have manufactured or sold resulting in damage to property
- Incorrect installation of equipment resulting in damage to property
- Injury, illness or death due to your negligence that is not covered by the ACC
A Professional Indemnity claim might arise because of you:
- Failing to provide promised services
- Being negligent in rendering professional services
- Providing shoddy, incomplete, or incorrect work
- Making mistakes or oversights
- Any omissions in the provisions of your service
Do I really need Public Liability Insurance?
If you or your employees interact with other people while doing business in any way or form then you need it. For example:
- Consultants/Contractors/ Tradespeople who work from home or visit their clients’ premises
- Businesses that have an office, showroom, shop or any premises where your customers or members of the public visit
- ALL business that have interaction with customers or the general public should have Public Liability insurance
Do I really need Professional Indemnity Insurance?
If you are being paid to provide your professional advice or service you have a duty of care to your clients, and therefore need to ensure you are adequately protected!
Professional Indemnity cover is necessary for:
- Anyone who provides paid professional advice or services to any business or individual
- Contractors who work for the government or other organisations whereby insurance is mandatory as a condition of the contract
- Occupations who are required to have professional indemnity insurance by law
An example of some professions that require PI cover are: health practitioners, IT contractors, management consultants, accountants and real estate agents.
If you are found negligent, the financial repercussions can be devastating. The cost of defending yourself alone could put you out of business, and then there’s the cost of settlements, whether agreed out of court or awarded by the court. With the right Public Liability or Professional Indemnity cover, your insurance company will provide much needed funds to cover your legal costs and any compensation claims, leaving your business free of financial risk. Phew!
Invest your time to carefully consider the unique risks to your business as well as researching the policies available to you will ensure you get the best policy to secure your business.
This is general advice only.