Covers you against the kind of liability that you as a member of the public may incur towards other members of the public. Such liability would generally arise as a result of breach by you of the duties that you owe to the public at large - what lawyers call 'tort'.
Liability in negligence is the most common type of liability likely to arise here.
Negligence is where you owe a duty of care to the world at large, you fail to fulfil that duty, someone else suffers loss as a result.
Could include such things as you walking down the street, not looking where you are going, walking into a window cleaner's ladder, knocking it over, the window cleaner falls off into the road, causing a car to swerve into the path of a tanker which hits the car & kills the driver of the car, the tanker's load spills & ignites & starts the Great Fire of London version 2.0. Any liability that you might have here (which would be limited to consequences reasonably foreseeable - so would probably stop short at the death of the driver of the car!) should be covered under such a policy.
Common exclusions: liability for deliberate acts (as opposed to accidental or negligent acts); liability arising out of the use of a motor vehicle by you; liability that you incur in the course of being an employer.
Often found as a bonus extra eg with your home or contents insurance.
Not expensive.
I once had a case where a 14 year old lost an eye playing cowboys with friends and an air gun. A 15 year old fired the gun, the pellet ricocheted and entered my client's eye. We thought we could establish liability on the part of the other lad's father but didn’t think he could afford to pay. I suggested in a carefully worded letter that he checked his household contents policy for public liability insurance. He did so and approached his insurers. They paid out.
Covers any liability that you as an employer might have towards your employees for death, injury, or disease suffered by the employees in the course of their employment for which you are legally liable.
Could include liability for you, as the proprietor of a window cleaning business, towards your employee who falls off his ladder because of a broken rung (which you knew might have been in a dodgy state) and breaks his arm.
All employers are required by law (Employers Liability (Compulsory Insurance Act 1969) to carry such insurance, other than (if the employer is an individual, not a company) for employees who are members of that individual’s family (as defined in the act).
Not expensive
Often found as a bonus extra with office contents insurance
Covers your liability to your clients for failure on your part to do what you have contracted to do, to the required standard. If the client suffers loss because you've screwed up and you are liable, then this should cover you.
Relatively expensive.
Common exclusions: Liability where you have completely failed to do perform your part of the contract at all - ie when you haven't done the job at all, as opposed to having done it and made a mistake. Many other exclusions - ALWAYS READ AND UNDERSTAND THE TERMS OF SUCH A POLICY!
It is often a condition of such a policy that you do not tell your clients that you carry such insurance
I've found Martin Taylor at Scott Taylor Associates, insurance brokers, particularly helpful in this field - mail them by clicking on this button.
Online PI insurance quote from Caunce O'Hara
See also Freelance Informer article: PI Insurance - 1st June 2001 - 'I'd better begin by saying that I'm NOT trying to sell insurance! But to my mind, PI (Professional Indemnity) insurance is a worthwhile investment for the Contractor, and I continue to be surprised by the relatively large number of Contractors who don't carry it. PI insurance will generally protect you, to a greater or lesser degree, against any liability you may have to third parties as a result of mistakes you make in the course of your business as a professional. Essentially, against failure to do what you have contracted to do, to the required standard.'
I'd really appreciate your feedback on this FAQ - so mail me and tell me what you think of it, if it's been useful to you, or let me know of any specific problem you have where I may be able to help.
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This page was last updated 26th May 2001.
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