What Does Public Liability Insurance Cover

Public liability insurance generally covers an organisation’s legal liability for third-party personal injury or property damage arising from its insured activities, subject to the policy terms, conditions and exclusions.

Depending on the policy wording, cover may include:

• Damages or compensation payable for covered legal liability
• Reasonable legal costs incurred in defending a covered claim, where covered under the policy
• Investigation and expert costs, where covered and approved by the insurer
• Claims arising from insured premises
• Claims arising from activities or events declared to and accepted by the insurer

The Australian Government describes public liability insurance as cover for situations in which negligence causes another person to be injured, die or have their property damaged. Exact coverage varies between policies, so organisations should check the applicable limits, exclusions and conditions. Read the Australian Government guidance

Public Liability Risks for Not for Profit Organisations

An organisation does not need to operate for profit to face a liability claim. Examples of incidents that may create a liability exposure include:

• A visitor slipping during a fundraising event
• A volunteer accidentally damaging a hired venue
• A member of the public being injured by equipment at a community activity
• A food stall allegedly causing illness
• Temporary signage, displays or cables creating a trip hazard
• A participant being injured during an organised program

Whether a particular claim is covered will depend on the policy wording. Some incidents, including food-related illness, may require products liability or another type of insurance. Exclusions or special conditions may also apply to sporting activities, participants, property in the organisation’s care, volunteers or particular events. Even when an organisation believes it acted responsibly, responding to an allegation can involve costs; public liability insurance may help meet covered defence costs and liabilities.

Is Public Liability Insurance Compulsory

Public liability insurance is not universally compulsory for every Australian not-for-profit organisation. Requirements can depend on the organisation’s activities, occupation, location and legal obligations.

Cover may nevertheless be required under:

• Venue or commercial lease agreements
• Council permits
• Funding agreements
• Supplier or service contracts
• Event participation conditions
• Agreements with government bodies or corporate partners

The required limit of cover may also be specified. Before signing an agreement, organisations should check whether their insurance matches the activities, indemnities and limits described in the contract.

Does Public Liability Cover Volunteers

Public liability insurance is primarily intended to address claims made by third parties. It should not be assumed to cover a volunteer’s own injuries.

The Australian Charities and Not-for-profits Commission recommends that charities consider volunteer protection insurance and assess whether volunteers are covered by other policies, including public liability insurance. Read the ACNC guidance

Depending on the organisation, additional cover may include:

• Voluntary workers personal accident insurance: May provide specified benefits when a volunteer is injured while performing authorised duties.
• Workers compensation: Is primarily designed for employees. Volunteers may be covered or treated as workers only in limited circumstances under jurisdiction-specific legislation or schemes, so the position should be confirmed with the relevant regulator.
• Journey or travel cover: May be relevant where volunteers travel on behalf of the organisation.

Insurance does not replace good safety practices. Under the model work health and safety laws, a volunteer organisation that is a person conducting a business or undertaking and has paid workers generally owes duties to both paid and unpaid workers. A volunteer association with no employees is generally excluded from those duties. The position depends on the organisation’s structure, activities and applicable state or territory law. Read the Safe Work Australia guidance

Public Liability and Association Liability Are Different

Public liability and association liability address different risks.

Public liability generally concerns third-party injury and property damage arising from the organisation’s activities. Association liability can address governance and management exposures involving directors, office bearers, employees and the organisation itself.

Depending on its needs, association liability may include sections dealing with directors and officers, employment practices, professional indemnity, crime or statutory liability. It does not automatically replace public liability or voluntary workers insurance.

KBI explains these distinctions in its guide to association liability insurance.

What Should an Organisation Check Before Buying Cover

When arranging public liability insurance for not-for-profit organisations, consider:

• The organisation’s complete range of activities
• Whether it runs events, markets, workshops or sporting activities
• The number and duties of volunteers
• Whether children or vulnerable people participate
• Use of owned, leased or hired premises
• Food preparation, equipment and temporary structures
• Required limits under contracts or permits
• Activities undertaken away from the usual premises
• Fundraising and member-run activities
• Policy exclusions, excesses and geographic limits

Activities should be described accurately to the insurer. A policy arranged for office-based administration may not automatically cover a large public event, sporting program or other higher-risk activity.

Organisations should also review their cover when they introduce a new service, move premises, increase attendance or change how volunteers operate.

Protecting Your Organisation and Its Community

Public liability insurance can form an important part of managing the financial impact of covered third-party injury and property damage claims. It is only one part of an organisation’s broader risk-management and insurance program.

KBI helps Australian associations, charities and community organisations review their activities, contractual requirements and volunteer exposures. Explore KBI’s insurance solutions for associations and not-for-profit organisations or speak with a specialist broker about structuring appropriate cover.

This article provides general information only. Any financial product advice is general in nature and has been prepared without taking into account your organisation’s objectives, financial situation or needs. Before acting on it, consider whether it is appropriate for your circumstances and read KBI’s Financial Services Guide and the relevant policy wording or other product documents. Cover is subject to insurer acceptance and the applicable terms, conditions, limits and exclusions.

KBI Pty Ltd is an Authorised Representative (AR No. 450152) of KBI Group Pty Ltd (ABN 56 167 437 121, AFSL No. 494792). For compliance, complaints and privacy information, visit KBI’s compliance page and privacy policy.

What is Public Liability Insurance?

Public liability insurance typically covers incidents where a person is injured or property is damaged due to your business operations, subject to policy terms, conditions and exclusions. This may be when something happens on your business premises, or while working at an external site. The alleged damage may affect a client, the general public, or their property.

Public liability may apply when a person is injured on a worksite, a contractor damages client property, or a customer slips in a store. In these and other instances, public liability insurance covers:

• Third-party bodily injury
• Third-party property damage
• Your legal defence costs, subject to policy limits and conditions.

What is Product Liability Insurance?

Product liability insurance covers claims that arise from products manufactured, supplied or sold by a business, including claims under Australian Consumer Law. Typically, a claim will be made after the product has left the business’s control.

In the case of service providers, such as repairers and installers, claims arising after completion of work may fall under products liability where goods have been supplied, or under public liability for completed operations.

A product liability claim may arise in situations such as a faulty appliance causing fire damage, contaminated food causing illness, or where an installed component later damages property. In these and other cases, product liability coverage includes:

• Third-party personal injury caused by a product/service
• Third-party property damage
• Your legal defence costs, subject to policy limits and conditions.

Public Liability vs Product Liability – What’s the Difference?

In the simplest terms, public liability insurance generally covers business activities, while product liability insurance covers products supplied or sold.

For service providers, the difference between product insurance and public liability insurance can relate to whether the claim arises from business activities or from goods that have been supplied. Public liability typically covers incidents arising from business activities, whereas product liability specifically relates to goods supplied or parts installed.

In practice, public and product liability are often combined into a single policy.

Common Insurance Scenarios – Public Liability or Product Liability?

Note that in addition to public and product liability insurance, service providers may also need professional indemnity insurance. This covers claims of financial loss due to incorrect or incomplete advice, mistakes in reports or calculations, missed deadlines, or failures to meet professional standards. Professional indemnity insurance is required in some Australian industries, and is also often required in client contracts.

Who Needs Public and Product Liability Insurance?

Public liability insurance is important for, but not limited to, tradespeople, builders, retailers, hospitality businesses, hairdressers, gym owners and event planners. Most Australian businesses that interact with customers or the public should consider public liability insurance. This includes both those with physical premises and those who work off-site. Public liability coverage is often required under lease agreements or within the terms of contracts.

Product liability insurance is essential for businesses that manufacture, import, distribute or sell goods, as well as those providing installation and repair services. These include retailers, wholesalers, contractors and hospitality businesses. Product liability insurance may be required as part of supply contracts and is sometimes a condition for council permits, depending on the type of business activity.

Holding appropriate insurance is important for protecting your business and its employees. It also provides reassurance to customers and peace of mind for business owners. If you’re not sure what sort of insurance you need, a general business insurance broker can help clarify your coverage needs.

How Much Public and Product Liability Insurance Do You Need?

Public and product liability insurance policies provide claims coverage up to a set dollar value, often $5 million, $10 million or $20 million. The appropriate limit will vary depending upon the nature of the business, where it operates or sells to, and the type of product. There may also be a minimum coverage required within client contracts.

In the case of importers, exporters and those operating across various territories, limits need to take into consideration who will be pursued for damages (for eg, the manufacturer or importer), along with the level of damages likely to be awarded within local legal systems. It’s also important to note that some policies may exclude certain territories or place different limits by location.

As a general rule, businesses should carefully review exclusions, limits and sub-limits to ensure all their business activities are adequately covered. A public and products liability insurance expert can help with this.

Protect Your Business with the Right Liability Insurance

Without insurance, a successful public or product liability claim can be enough to severely impact or even put you out of business. To mitigate this risk, it’s imperative that your business select the right type of insurance, be it public liability, product liability, or combined cover, as well as the right level of cover.

The advice of an insurance expert can be invaluable in making sure every aspect of your business is adequately covered. KBI insurance brokers can help identify operational risks, provide tailored insurance recommendations, and assist in weighing up the costs and benefits of each option.

For a liability insurance review and tailored advice from industry specialists, contact KBI today.

Frequently Asked Questions

Is public liability insurance mandatory in Australia?

Public liability insurance is not usually required by law in Australia, but is frequently required as a condition of contract, including for commercial leases, council permits, licences and event agreements. Contracts often specify minimum cover amounts, such as $10 million or $20 million.

Does public liability insurance cover damage to your own property?

No. Public liability insurance covers claims made by third parties for injury or property damage caused by your business activities. Damage to your own property or equipment would usually be covered under property or business insurance, subject to exclusions such as wear and tear.

Does product liability insurance cover product recalls?

Product liability insurance typically covers claims for injury or property damage, but does not automatically cover the additional costs of recalling products from the market. Expenses such as notifying customers, shipping returns, and replacing products may require separate cover.

Does liability insurance cover overseas sales?

Liability insurance can cover overseas sales or operations, but there may be territories that are excluded or where coverage limits apply. Businesses that export products should review the wording of their policy carefully to ensure the countries they sell to are covered and to an adequate level.