Liability insurance and professional indemnity
If you own a business, you may be liable for damages or injuries to another person or property. Though liability insurance is optional in most cases, it is strongly recommended for businesses in all industries as the likelihood of being sued is unpredictable and potentially very costly.
There are several types of liability insurance to consider:
Public liability insurance protects you and your business against the financial risk of being found liable for negligence. Negligence is causing reasonably foreseeable harm, including:
- injury or death, such as due to a slug in ginger beer making a customer sick
- negligent advice, such as saying a company or employee is performing well when they’re not
- nervous shock, such as emotional distress or a recognised psychiatric illnesses
- property damage, such as negligently causing a fire
- pure economic loss, which occurs in very rare cases where there’s a special duty of care and a negligent act or omission causes a business to lose expected revenue.
Professional indemnity insurance is a variety of insurance products that help professional cover the cost of litigation. Depending on the product, this may include liability due to:
Breaches of contract, such as:
- not achieving the results of a contract
- not building a boat on time
- providing negligent advice, such as:
- bad financial advice
- giving wrong nutritional advice
Mistakes providing a service, such as:
- not auditing a company’s accounts properly
- performing a surgical procedure wrongly.
Sometimes, professional associations offer industry-specific professional indemnity insurance.
If you sell, supply or deliver goods, even in the form of repair or service, you may be liable if your products cause:
- injury or death
- property damage
- nervous shock, such as emotional distress or a recognised psychiatric illness.
Product liability insurance covers you if any of these events happen to another business or person by the failure of your product or the product you are selling.
What to do...
- Read more about product liability on the Australian Competition and Consumer Commission website.
- Talk to a number of insurance companies and brokers to discuss what is best for you.
- See information about insurance in your state or territory.
- Read about Fair trading for information on product safety, product recalls and trade measurement and labelling.