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 killed, or a person’s property to be damaged or destroyed or they suffer loss as a result of relying on your services or advice.

There are three forms of liability insurance:

  • Public liability
  • Professional indemnity
  • Product liability

Liability products are most commonly taken out by businesses for risks involved in their day-to-day operation, but they are also built into many property insurance policies, for example liability cover in home and contents insurance.

Liability insurance covers two key financial risks. One is the legal cost of defending a claim. The second is the compensation that you may be directed to pay the injured or wronged party, plus their legal costs, if a claim against you is upheld.

These usually include an excess to be paid by the policyholder in the event of a claim, and generally set a limit on the total amount payable under the policy, as well as a per-claim limit.

Products liability: damage or injury caused to another business or person by the failure of the product you manufacturing, supply or sell. This can include design, manufacturing or instructional defects.

Public liability: legal and medical costs that arise from an incident on your property or while working on another’s property, regardless of whether you are at fault.

In short, public and products liability insurance covers legal and compensation expenses if you or your employees cause injury, death or property damage arising out of your business’ operations, activities or products. It even includes Product Recall Insurance to cover costs associated with recalling stock in the event of a product fault.

Can you carry the risk?

It’s tempting to think your risk management is so effective that you can assume all public and product liability risks. But how well have you quantified those risks? Understanding potential for personal injury or property damage across your operations is difficult from the inside.

A full evaluation by an external risk expert can reveal serious exposures you were never aware of. Increased litigation activity from claimants and solicitors means that:

The exposures you face are increasingly translating into real-life cases, costing companies like yours large sums of money.

It is more common for businesses and clients to demand proof of public liability and product insurance before entering into contracts.