Public liability insurance, or PLI, is one of the most-important types of policies that a business owner can carry – particularly if his business involves dealing directly with the public (e.g., operating a restaurant or store). Sometimes thought of as the minimum policy a business should carry before opening its doors, it covers legal expenses that arise from accidents like customers slipping and falling on a wet floor, being injured by a falling object, or having their automobile damaged while on your property. In short, it protects the insured against property damage and loss, or any type of injury that may affect a third party (i.e., member of the public) while on your business’ premises.
How Does Public Liability Insurance Differ From General Liability?
Public liability insurance is included in general liability coverage, and is simply represented by the language within the GLI policy that pertains to protection against public claims. Due to the higher cost associated with purchasing full general liability coverage, some business owners prefer to carry only the PLI. Doing so is certainly cheaper, and may make perfect sense in some cases, but it does leave the policy holder exposed to potentially major risks.
For example, a public liability policy does not cover claims filed against your business by employees, vendors, and shareholders, and as such, may not represent adequate coverage by itself. Lawsuits filed by these parties often end up being just as costly for the business owner as are those filed by third parties, and have been responsible for the demise of many under-insured small businesses.
Additionally, because public liability insurance is a less-expensive alternative to a full GLI policy, it also tends to carry significantly lower policy limits. With this being the case, it is usually recommended that additional umbrella coverage be purchased to cover expenses that exceed your PLI.
Can My Business Survive On Public Liability Insurance Alone?
If you’re deliberating over whether or not your business needs additional coverage beyond that which is provided by a public liability insurance policy, you should first conduct an honest appraisal of the types of exposure that exist in your daily business environment. If you’re able to answer “no” with a high degree of certainty to each of the following questions, then your business may be one that can get by on public liability coverage alone.
The questions you should ask about your business are:
- Will my business premises have daily foot traffic from non-public parties (e.g. employees)?
- Is it a contractual requirement of any associate businesses (e.g., my vendors, etc.) that I carry general liability insurance before allowing their employees to visit my site?
- Is it a legal requirement in my city, state, or country for businesses to carry coverage beyond PLI?
- Are my business, and or personal assets sufficient to cover the cost of defending against any non-public lawsuits (including nuisance suits) that may arise?
- Should a non-public claim result in a judgment against my business, would the business have sufficient resources to cover the expense?
Even if your business is one of those unique types that can answer “no” to each of these questions, it is still highly advisable that you further discuss the ramifications of not carrying GLI with a professional insurance agent. While your business may very well be able to survive on public liability insurance alone, it is still not recommended. Regardless of the additional premium associated with a general liability policy, it will quickly pay for itself in the unfortunate event that a claim beyond the limits of your public liability insurance policy is filed against your business.