Public Liability vs Product Liability: Why it’s Different

Public Liability Insurance has many appealing benefits that will help you protect your enterprise. However, there’s a tendency for people to get confused between public liability and product liability. Discover more as Budget Insurance discusses how public liability and product liability differ so you can ensure you get the right kind of coverage for your business. 

Public liability scope

Public liability refers to claims made against businesses due to personal injury or property damage resulting from alleged negligence or inadequate operations. A claimant, or injured party, may seek compensation. As the policyholder, protecting your business and its operations is an important aspect of this insurance because Public Liability Insurance safeguards the financial consequences of these claims.

Budget Insurance provides businesses that operate in public spaces, like eateries and retail stores, with comprehensive coverage under Public Liability Insurance. This protection is also extended to industrial properties visited by members of the public.

Example of a public liability case

Imagine owning a vibrant café in the heart of the city where a typical public liability situation unfolds. One fateful afternoon, a bustling customer slips on the wet floor that had no visible warning signs, resulting in injuries. Now, picture the injured customer stepping forward as the claimant, seeking reimbursement for medical expenses, loss of income, and other damages caused by the incident. Running any business can be stressful, especially if you’re operating in the public domain, but having Public Liability Insurance cover will ensure a business owner is protected from any financial or legal consequences that may arise from a third-party claim. Discover more about Why you need Public Liability Insurance for your business. 

Product liability scope

It's worth noting that Public Liability Insurance typically only covers claims related to your business operations and not product liability. Safeguarding against injuries or damage caused by a faulty or compromised product requires a separate insurance policy that shields manufacturers, distributors, and retailers from legal expenses and damages due to product liability risks. This coverage is designed to specifically protect against design or manufacturing flaws, as well as a lack of adequate warning labels or usage instructions. For those who are uncertain about their coverage, it’s advisable to seek guidance from a professional insurance broker. 

Example of a product liability case

Imagine yourself as the proprietor of an electrical appliance manufacturing company where your products retail at a local supermarket. One of these products experienced a malfunction, which triggered a small fire that led to some property damage in the customer’s home. Consequently, the aggrieved person decides to pursue a formal request for compensation, seeking reparation for the damage. To mitigate these risks, it's important to note that Public Liability Insurance alone wouldn't cover your business against this type of claim. To protect your business from product-related claims, it's essential to secure a distinct Product Liability Insurance policy[1]

How to manage liability risks?

Businesses in South Africa are struggling amid a challenging economy. The data shows that trade, catering, and accommodation are the worst-hit industries[2]. For any business, managing liability risks is a must. Addressing both public liability and product liability is crucial. Liability is a pressing issue for all types of businesses, both small and large. To minimise the risk of this liability, it’s recommended to opt for Public Liability Insurance. This type of Business Insurance covers legal expenses and compensation if the policyholder is held liable for third-party injury or property damage. Without insurance, businesses and organisations that interact directly with the public, such as retail stores, restaurants, and factories, would be held personally responsible for compensation payouts and legal expenses. 

Ways to minimise public liability risks

It's imperative to mitigate risks of public liability by:

• Assessing the risks of your business operations thoroughly to ensure safety and stability.

• To minimise the probability of accidents, it is essential to implement suitable preventative measures and controls.

• Proper employee training should be given to maintain precautionary measures and appropriate customer engagement.

• Regular inspections are required to detect and resolve any possible risks.

• To ensure the well-being of your customers, it is vital to strategically position warning signs and disclaimers to communicate all potential risks that may be present effectively.

Ways to prevent product liability risk

Consider the measures a business can take to manage the risks associated with product liability effectively:

• During product development, it is crucial to carry out thorough risk assessments.

• Staff training and adherence to safety standards and regulations are essential in establishing resilient quality control processes.

• Product packaging should include clear and concise warnings or usage instructions.

• Put safety at the forefront by diligently conducting comprehensive testing and certification to guarantee the utmost compliance and ensure the protection of consumers.

• Promptly addressing any potential defects or hazards by having a product recall and response plan in place.

• To defend your business against claims related to malfunctioning products, it is vital to acquire the necessary Product Liability Insurance coverage.

Get a Business Insurance quote from Budget Insurance

Public Liability Insurance covers you from third-party claims that may arise from your business activities. To reduce the risks caused by defective products, we recommend obtaining an insurance policy for product liability since Public Liability Insurance cover typically does not cover it. Take care of your business and apply for a Business Insurance quote online.