Professional indemnity insurance vs public liability

Professional indemnity vs public liability insurance: what’s the difference?

Professional indemnity insurance and public liability insurance are often confused – but they cover very different risks. One is designed to protect you if a client claims you’ve made a professional mistake. The other helps if a third-party is injured or third-party property is damaged because of your work/actions. Depending on your profession, you may likely need both professional indemnity cover and public liability.

If you don’t live and breathe insurance (like we do!), professional indemnity insurance vs public liability might not be very clear. This guide breaks down the differences clearly, so you know what cover you need – and why.

Public liability insurance

Public liability insurance may be necessary if you’re responsible for any third parties or third-party property that could be adversely affected by your actions. Ultimately, this insurance can help cover compensation claims made by third parties for accidental injury or property damage linked to your business activities.

Say for example you’re an IT contractor working at a client’s office. While there, you send your morning tea flying and it goes all over one of your client’s computers and damages it beyond repair. The client could then sue you for the cost of a new computer but your public liability insurance could cover you so you don’t have to fork out yourself (although it might be worth investing in a lidded travel mug!).

While it isn’t a legal requirement, it’s wise to have public liability insurance now that many new contracts stipulate you need to have it. But, even if this isn’t the case, it can help cover you for damages that could be claimed against you as well as associated legal fees – it’s a bit of peace of mind.

What public liability covers

Public liability insurance operates on a ‘losses occurring’ basis. This means that you can be covered for any claims made for incidents occurring during the period of cover, even if your policy has since expired.

The two main day-to-day risks you might face that public liability covers are:

1. Damage to the property of a customer or member of the public
2. Physical injury to a customer, visitor or passer-by

Examples of what a policy might cover more specifically include:

• Bodily injury or property damage to a third party
• Compensation payments
• Repair costs
• Professional fees
• Medical costs

More specifically, it can also help cover legal costs if a third party takes legal action against you for an incident connected to your work.

Professional indemnity insurance

Professional indemnity insurance cover is designed to protect you should you be sued for making a mistake due to professional negligence, or you’re deemed responsible for a mistake happening. Specifically professional errors that could result in financial loss for a client.

Professional indemnity insurance covers the compensation you may need to pay as well as your legal fees.

For example, you’re project managing the implementation of your client’s new business system and you make incorrect assumptions without research regarding its compatibility with existing systems. The implementation causes a major crash, costing your client time and money while their systems are offline. You admit liability as this is down to your own professional negligence, however, your professional indemnity insurance could cover you for a compensation claim, as well as additional costs incurred (e.g. legal).

Another example would be, if you provide poor business advice that leads to financial harm, the client may seek damages – which your professional indemnity insurance can help cover. Even something as simple as including incorrect contact details on a deliverable can result in a claim if it causes the client reputational or operational issues.

Seen as business insurance and showing you’re taking on financial risk, professional indemnity insurance may also assist with outside-IR35 status.

What professional indemnity insurance can cover

Unlike public liability cover, professional indemnity insurance operates on a ‘claims made’ basis. This means that you’re normally only covered for claims made against you during the period of cover, regardless of when the contract was carried out.

It’s therefore recommended that you take out professional indemnity insurance and maintain your policy even when you’re no longer working on a contract. This means you’ll still be covered should a professional indemnity claim be made against you after the contract period has ended. That’s extra reassurance you won’t have to cough up tens or hundreds of thousands of pounds in compensation for a current or former client.

This type of insurance covers claims arising from both genuine mistakes and unfounded accusations, giving you peace of mind in any scenario.

More specific examples of what Professional Indemnity insurance covers can include:

1. Professional negligence
2. Loss of private data or documents (e.g. confidential client information)
3. Financial loss/loss of goods
4. Defamation (including libel and slander)
5. Breach of copyright or confidentiality (e.g. intellectual property rights)

Comparing professional indemnity insurance vs public liability insurance

Now we’ve gone over what public liability insurance and professional indemnity insurance cover, you can hopefully start to see the difference between them.

As a summary, the key differences between them are:

The claims they can cover

Public liability insurance: When you’re responsible for third parties (or third-party property). Can primarily cover you for damage to property and physical injuries to visitors, customers or passers-by.

Professional indemnity insurance: When providing a professional service, whether through consultancy, data handling, or handling of customer goods. Covers in the event of claims arising from professional mistakes or failings on your part.

The basis they can operate on

Public liability insurance: Operates on a ‘losses occurring’ basis (any claims made for incidents occurring during the period of cover, including after your policy has expired).

Professional indemnity insurance: Operates on a ‘claims made’ basis (only claims made during the period of cover, regardless of when the contract was carried out).

So, there you have it. While at first glance public liability and professional indemnity cover may seem similar, they’re actually very different. Of course, the level of cover for both public liability insurance and professional indemnity insurance depends on your specific circumstances. Although, in many cases we advise having both.

Public Liability and Professional Indemnity cover with Kingsbridge

At Kingsbridge we regularly get asked the difference between public liability insurance and professional indemnity cover, so if you still have any lingering questions, we’re here to help.

We’re also here to make getting the insurance you need easy, which is why we’ve designed some of our packages to include public liability and/or professional indemnity as standard, like our combined contractor insurance policy.

If you’d like to chat to us further about public liability or professional indemnity insurance, or what our policies cover, give our in-house experts a call on 01242 312 604 – we can help make sure you’re covered.