Public Liability Insurance NZ: What It Covers and What It Doesn't

What is Public Liability Insurance?

Public liability insurance protects your business against claims made by third parties — customers, suppliers, members of the public or anyone else who is not your employee — for bodily injury or property damage caused by your business activities.

It is arguably the most fundamental form of business insurance and is the first policy most businesses should consider. Despite this, many businesses either carry no public liability cover, carry inadequate limits, or hold a policy that doesn't actually cover their specific activities.

This article provides a plain-English guide to public liability insurance , covering what it includes, what it excludes, how to choose the right limit and what questions to ask when comparing policies.

What Public Liability Insurance Covers

A standard public liability policy will cover:

Bodily Injury to Third Parties If a customer slips and falls in your shop, a visitor is injured at your premises, or someone is hurt as a result of your work activities, public liability insurance covers your legal liability for their injuries. This includes medical expenses, lost income compensation, and general damages for pain and suffering.

Third-Party Property Damage If your business activities damage someone else's property — a contractor accidentally breaks a pipe flooding a client's office, a tradesperson drops a tool through a customer's roof, or a delivery vehicle damages a client's fence — public liability covers your legal liability for the cost of repair or replacement.

Legal Defence Costs Even if you are not ultimately found liable, defending a public liability claim can cost tens of thousands of dollars in legal fees. Your policy covers your legal defence costs regardless of the outcome of the claim.

Products Liability (Usually Included) Most public liability policies include products liability as standard or as an extension. Products liability covers claims arising from damage or injury caused by products you have sold, supplied or manufactured, after they have left your control.

What Public Liability Insurance Does NOT Cover

Understanding exclusions is just as important as understanding inclusions. Common exclusions in public liability policies include:

Your Employees Public liability does not cover injury to your own employees — that is the role of ACC and employer's liability insurance. If an employee is injured due to your negligence beyond what ACC covers, a separate employer's liability policy responds.

Your Own Property Public liability covers third-party property damage, not damage to your own assets. Your own premises, equipment and stock require commercial property insurance.

Professional Advice or Services Most standard public liability policies exclude claims arising from professional advice or the performance of professional services. If you are a consultant, architect, engineer, accountant or other professional, you need a separate professional indemnity policy to cover advice-related claims.

Contractual Liability Liability assumed under contract — beyond what would apply at law — is typically excluded. If you contractually agree to take on another party's liability (for example, in an indemnity clause in a contract), your public liability policy may not cover this unless it specifically includes contractual liability.

Deliberate or Intentional Acts Coverage applies to accidental events, not deliberate or intentional damage caused by you or your employees.

Pollution and Contamination Many standard policies exclude pollution liability. If your business involves chemicals, waste management or any activity with pollution potential, you may need a specific environmental liability extension.

How Much Public Liability Cover Do You Need?

Choosing the right limit of indemnity depends on several factors:

Contractual Requirements Check any commercial leases, client service agreements or government contracts you hold — these often specify minimum public liability limits. Government and local authority contracts frequently require $10 million.

Business Activities Higher-risk activities justify higher limits. A home-based consultant with limited client contact might be adequate with $1–2 million. A construction company working on large commercial projects should hold $5–10 million or more.

Market Norms for Your Industry Most trade and professional associations publish recommended minimum public liability limits for members. These are a useful starting point.

Potential Severity of Claims Consider the worst-case scenario for your business. If your activities could realistically cause catastrophic injury or significant property damage, the limit needs to reflect the potential severity, not just the probability.

Common Cover Limits

• Sole traders and home-based businesses: $1–2 million
• Small retail or hospitality: $2–5 million
• Trades and contractors: $5–10 million
• Larger commercial operations: $10–20 million+

Public Liability vs. Professional Indemnity

These two covers are frequently confused. The key distinction:

• Public liability covers physical injury or property damage caused by your business activities
• Professional indemnity covers financial loss to a client caused by errors, omissions or negligent professional advice or services

A management consultant who gives advice that costs a client money needs professional indemnity. If the same consultant's client trips over their laptop bag during a meeting, that is a public liability claim.

Many businesses need both — particularly service businesses that visit client premises (public liability for the visit, professional indemnity for the advice given).

Industry-Specific Considerations

Retail and Hospitality

Slip-and-fall claims are among the most common public liability events. Wet floor, uneven surfaces, inadequate lighting — all are sources of claims. Ensure your policy includes cover for food and beverage service if applicable, and confirm products liability is included for any goods sold.

Construction and Trades

Contract requirements typically specify minimum limits. Ensure your policy covers your specific trade activities — some policies exclude certain operations (roofing, demolition, work at height) unless specifically declared. Check whether subcontractors are covered under your policy or need their own.

Events and Venues

Event-based public liability requires care around crowd density, temporary structures, food and drink, and liquor service. Event-specific policies or event extensions to annual policies are often more appropriate than standard annual covers for one-off events.

Healthcare and Wellbeing

Many public liability policies exclude medical treatment or procedures. Healthcare practitioners need specialist medical malpractice cover alongside public liability for premises-related incidents.

Tips for Comparing Public Liability Policies

When comparing policies, go beyond the premium and pay attention to:

1. Policy wording — is your specific activity explicitly covered? 2. Products liability inclusion — is it included or an add-on? 3. Geographical scope — does it cover work performed offshore? 4. Subcontractor coverage — are subcontractors covered or excluded? 5. Excess/deductible — what do you pay per claim? 6. Claims-made vs. occurrence basis — occurrence basis is generally preferable for long-tail liability 7. Retroactive date — for claims-made policies, what historical period is covered?

An insurance adviser can help you navigate policy differences and ensure the policy you buy genuinely covers your business activities.

Getting the Right Public Liability Cover

The best approach is to work with a specialist commercial insurance adviser who understands your industry and can ensure your policy is fit for purpose. A broker can compare policies from multiple insurers, negotiate coverage terms, and ensure your policy doesn't contain unexpected exclusions.

Use our online form to connect with a qualified insurance adviser who can assess your public liability needs and provide competitive options.