Liability insurance is not an “everything cover” – and honest information starts by saying so plainly. The map below sets out the areas that are typically covered and typically not. The exact boundaries are always drawn by the given insurer's current contract terms – what we're learning here is how to read the pattern.
- Typically covered: bodily injury and property damage caused to someone else, and, under professional cover, pure financial loss too.
- Typically not covered: intentional damage, fines, extra liability taken on by contract, and fixing your own defective work.
- The boundaries depend on the product and the terms: the same loss event can be covered under one policy and excluded under another.
What you can typically count on
The core of public liability cover is bodily injury (a guest slips on the freshly washed steps) and property damage (the movers scratch the piano) caused to someone else in the course of the work. Professional indemnity cover adds pure financial loss to this: harm where nothing physically broke, yet a loss still occurred – a fine, extra cost, lost profit. As part of claims handling, the insurer typically also covers the justified costs of a legal defence when a claim is disputed – one of the product's most valuable, and least known, features.
What you typically can't count on
Four recurring boundary lines. First: intentional damage cannot be insured – and how gross negligence is judged depends on the policy terms (separate article). Second: an official fine, penalty or punitive charge is typically not a loss but a sanction – even if it stems from a professional error, most terms exclude it or treat it separately. Third: extra liability taken on by contract – if you agree to bear liability beyond what the law requires, the insurer typically won't stand behind that extra layer. Fourth: fixing or redoing your own defective work – replacing badly laid flooring is a business risk, not an insurable loss; it only becomes a matter of cover if the faulty work causes damage to something ELSE (poor insulation lets water into the neighbour's flat).
Your own losses – a different territory
A common misunderstanding is that liability insurance also protects the business's own equipment. It doesn't: damage to your own machinery, tools, stock or premises belongs to the world of property insurance – the territory of vagyon.biz. The own damage vs. damage caused key article covers this distinction in detail.
How should you read your own policy?
In three steps: what activity and type of loss is covered; how large the limit and the deductible are; and what the exclusions and additional conditions are. The policy-reading crash course and the policy-review checklist give you a method for this – and if you'd like your current policy reviewed, bring it to a free consultation.
Example: two losses, two outcomes
Same tiler, two events. First: the cutting disc gashes the client's door – property damage to a third party's belongings, the classic territory of public liability cover, and the claim runs its course smoothly. Second: the tiling bulges up two weeks later and needs relaying – that's a defect in the tiler's own work: redoing it is a business risk, not an insurable loss. In practice, the two cases often get blurred together, yet the line between them is sharp: insurance does not vouch for the quality of the work itself, only for damage that the work causes to something else. Anyone who understands this distinction also reads policy terms well – and won't be caught out by the small print.
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