Why does a shop need public liability insurance?
Customers in a shop could potentially be injured. This may be whilst they are in the shop, or passing by. It could be a loose carpet or other tripping hazard, inside the shop. Outside, part of the signage could cause an injury if dislodged in bad weather. It is not only people that can be injured, property could also be damaged.
This is where public liability insurance comes into effect. If a third party person is injured, or property is damaged, the shop can be responsible. Instead of the shop facing a potential legal bill, they’ll arrange public liability insurance instead.
Is it a requirement of a shop to have public liability insurance?
In the UK, there is no legal requirement for shops to arrange this cover. With the increase in litigation though, it’s a sensible cover to arrange.
How can a shop arrange this cover?
We’ve mentioned the availability of shop insurance package policies in previous posts. These policies are how business insurance companies provide the range of covers a shop may need. Public liability is one of the standard covers provided. This is how the majority of shops arrange their liability cover.
There are policies available that only provide public liability. However, as shops will need other covers as well, these are rarely used.
Commercial combined insurance policies are also another option. These are usually for much larger or multiple location retailers.
What limit of liability is provided?
We’ve mentioned above there is no legal requirement to arrange public liability insurance. This raises the question of what limit of indemnity should be chosen.
Employer’s liability insurance is a legal requirement, for most businesses. Legislation states that the limit of indemnity should be no less than £5,000,000. Most insurers automatically provide cover at £10,000,000.
Public liability limits tend to be driven by the industry itself. In the late 1980’s and early 1990’s, the minimum public liability limit was around £250,000. Gradually, the potential for claims above this figure increased. As a result, insurers increased the minimum limits they provided. These went from £500,000 to £1,000,000 and are now at £2,000,000. Most shop insurance package policies will not provide public liability for less than this figure.
What about increased limits?
Sometimes, there is a need to increase this limit. Normally, this is at the request of the landlord or the local authority.
Example 1 – Local Authority
Many shop premises have outside seating, signage or promotional displays. These may be on local authority or council property, usually a pavement or concourse. If someone is injured in these areas, the local authority does not want to foot the bill. Especially where they’re not responsible.
They may insist on a certain limit of indemnity being in force, for public liability. This will be a requirement for them allowing the shop to use their pavement area.
Most local authorities are now insisting on a minimum limit of £5,000,000 for public liability.
Example 2 – Landlord
Where retailers are based in shopping centres, the landlord may also insist on a minimum level of public liability. Many are now asking for cover at £10,000,000.
How do shops arrange an increased limit of indemnity?
If the limit required is £5,000,000 the main insurer of the package policy should be able to provide this. There will be a small increase in premium, but this should not be substantial.
If the limit is £10,000,000 this can be trickier to arrange. Not many insurers are happy to provide £10,000,000 of cover. Where this is required, you’ll need to speak to your business insurance broker. They’ll be able to arrange a separate, top up, layer of cover, for another £5,000,000.