Public Liability vs. Employers’ Liability Insurance: Key Differences

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But although you may understand the importance of liability insurance for your company, there are different types to consider. Two of these are public liability and employer’s liability, and they are both essential for your business.

Here are the 4 key differences between public liability vs employers’s liability insurance policies.

Source of the Liability Claims

The first obvious distinction between these two types of business liability insurance is in whose liability claims you’re covered for. 

Public Liability Covers Claims From the Public

Public liability is just the older form of what is now known as general liability insurance. It covers your business’ legal expenses in liability claims brought against you by the general public. 

Like the general liability protection offered by caregiver insurance coverage, it covers your legal expenses should a third party claim damages after injury to themselves or damage to their property. These would be your customers, clients, delivery personnel, or any visitors to the business premises.

Employer’s Liability Covers Claims From Your Employees

Employer’s liability only covers you in cases where employees bring such claims. It covers your legal expenses when employees are injured during their work duties, and you are held liable. This coverage does not extend to their dependents.

There is an exception in the event of the death of your employee while carrying out their work duties. If you are liable, their family members can bring a liability claim. Employer’s liability insurance does not cover other accidents outside of work premises or work duties. 

Potential Alternative Insurance Policies

While public liability has no real alternative, there are instances where an employer’s liability overalls with another type of insurance.

No Real Alternative for Public Liability

There are other types of liability insurance that you may consider for your business that covers claims from the public. Examples are professional indemnity and auto liability for your company vehicles. These are good to have if you are providing a professional service, or if you have company-owned vehicles.

However, they don’t offer the type of liability coverage that a public or general liability insurance policy does. Therefore, there is no real alternative for public liability insurance. Also, even businesses that don’t need those other types of liability insurance, generally need public liability coverage.

Employer’s Liability Overlaps with Workers’ Compensation

Employer’s liability insurance covers expenses if you get sued by your employees for punitive damages. There’s another type of insurance called workers compensation, which covers employees’ injuries while working. These insurance types cover different aspects of the same incidents and are often sold together.

But there is sometimes an overlap between the two. Some workers’ compensation policies include employer’s liability. An employer’s liability policy usually covers you in cases where you have no worker’s compensation policy in place. 

Legal Requirements for Coverage

While one of these types of liability insurance is not compulsory, the other one is sometimes legally required.

Public Liability Not Mandatory

Public liability insurance, while strongly recommended,  is not a legal requirement in the US, UK, or most other countries. It is, however, considered good business practice. Unless you have customers or clients regularly visiting your premises it might not be strictly necessary.

Employer’s Liability Sometimes Legally Required

Employer’s liability is mandatory in the UK and applies as soon as you become an employer. In most US states, an employer’s liability insurance is usually included as part of your workers’ compensation coverage. (Most US employers are legally required to purchase worker’s compensation).

Geographical Limits

Most insurance policies also have a ‘geographical limit’ or ‘territorial limit’. It differs from jurisdictional limits, which govern the countries and territories where court cases against you are covered. 

Geographical limits exclude claims relating to work carried out in specific locations. But just as with your local employer’s liability, your need for employer’s liability abroad is not that simple.

Public Liability Limits

Most public or general liability insurance policies will have limits on where they offer coverage. But you may purchase an insurance product called a world insurance policy for the general or public liability of your company’s overseas branches.

It’s not usually a legal requirement, either locally or abroad. However, even if not compulsory, public liability for your overseas work premises is good business practice, just as it is locally.

Employer’s Liability Limits

Employer’s liability insurance policies have similar geographic limits. However, world insurance policies for employer’s liability are also available. But while public liability world insurance may not be legally required, the same cannot always be said for employer’s liability.

You may decide to hire international workers who are based in the country you’re expanding to. Alternatively, you might choose to send your local staff over there. However, you have a duty of care towards your employees on foreign and domestic soil.

Therefore, the legal requirements for your workers abroad will vary depending on the nature of the work. There could also be additional employer liability requirements depending on which country they are working in. 

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.