Difference Between Public and Product Liability Insurance

Adit Bhatnagar
May 20, 2023
4 min read

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Product and public liability insurance can be bought together as a bundle under commercial general liability insurance. They are both top insurance policies needed to protect the business’s liability when things don’t go as planned.

The right liability insurance is crucial for a business, as it can protect it from substantial financial losses and reputational damage.In addition, both public and product liability cover third-party injuries and property damage arising from business activities or mistakes.

Understanding the different insurance and risks is important for every business. As each insurance covers distinct risks. This article explains the purpose of public and product liability insurance and the key differences between them.

What is Public Liability?

Every business faces public liability risks on its premises and when meeting clients. The company is responsible for any third-party injuries or property damage occurring on the premises or arising from business activities.

Thus, businesses that invite customers and clients to their sites are at higher risk of public liability claims. These businesses include restaurants, shops and even gyms. A public liability claim can be expensive and ruin the business’s reputation.

Therefore, businesses should purchase public liability insurance before it’s too late.

Public Liability insurance protects the insured if a third party sues the business, alleging that business activities or negligence caused them some bodily injury, death or property damage.

Public Liability Insurance Cover Includes:

The insurance will cover the cost of:

Bodily Injury : The insurance covers medical and compensation costs for injuries.
Property Damage: The insurance will cover damage to a third party’s property, including the cost of replacement or repair.
Legal Expenses: Additional cover is the cost of hiring and paying a lawyer to defend your business in a lawsuit. At times, the company is not at fault, and it may be a false claim that needs to be fought.

Public Liability Examples

For example, a customer enters your shop and slips and falls on a wet floor. The customer has the right to sue the business for injuries resulting from its negligence. The company will be liable to pay for the injury and any compensation, depending on the severity of the injury.

Another example is if, during a meeting (at any location), your employee spills coffee on the client’s laptop. The client can sue the business for property damage and loss of essential files. The company will be liable to pay for the repair or replacement of the property and compensation, if experts can’t recover the work.

What is Product Liability?

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The product industry is among the largest, encompassing millions of products across food, medicine, clothing, technology, and more. Each business in the industry can be exposed to multiple product liability risks.

Additionally, all product businesses are responsible for the product’s outcome for their customers. A product can harm a customer in many ways. Third-party injury or property damage due to a product defect can result in an expensive lawsuit against the business.

Hence, businesses buy product liability insurance. Product liability insurance provides cover against bodily injury or property damage claims against a product a company- sells, makes or distributes.

Product Liability Insurance Cover Includes:

The insurance will cover most costs related to claims that result from:

Design Defects: claims related to product issues due to poor design.
Manufacturing Defects: claims related to problems while creating or assembling the product. This can include toxic chemicals used or wrong materials.
Failure to Warn Claims: claims that the seller failed to provide detailed labels or warnings on risks and proper use

Product Liability Examples

A well-known example of a product claim (manufacturing defect) is the Samsung phone battery that exploded, causing injuries and property damage worldwide and leading Samsung to pay millions to resolve cases.

Another example is a poorly designed coffee machine that sprays hot liquid on users, causing burn injuries. An injured third party can sue the coffee machine business for the design defect. The company will be responsible for medical costs and compensation.

Does A Business Need Both Public and Product Liability Insurance?

Companies must understand their risks and the insurance policies available to protect them. Businesses do not intend to harm their customers and clients; unfortunately, accidents happen. Combining public and product liability insurance will protect your business from almost all third-party risks.

Additionally, having both insurance policies will help a business reduce financial risk and protect its reputation. No business should suffer from errors beyond its control, and these insurance companies understand that. Therefore, insurance reimbursement benefits both the company and the third party by providing the best coverage in challenging situations.

Having the right combination of insurance also provides peace of mind even before an incident occurs. Companies do not have to constantly worry about risks and can stress less, knowing there are policies in place if things go wrong.