How are Liability and Public Liability Different?

There are several kinds of liability insurance, such as public liability, general liability, professional liability, etc. The liability policies are generally purchased by business persons and professionals or self-employed. The policy covers the claims of a third party that have been caused due to the error or omission of the insured. Therefore, before buying an insurance policy, one must understand public liability vs. liability insurance.

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Public Liability vs. Liability Insurance

Basis Public Liability Policy Liability Policy
Meaning One may understand public liability vs. liability insurance by comprehending its meaning. The public liability policy is explicitly associated with the public. It protects the business owners against the claim arising for the member of the public. Liability policy or general liability insurance covers a broad range of claims for professional and business owners.
Example Damage or injury caused to the public due to error or omission or the wrongful act of an organisation. It includes public liability policy, professional indemnity insurance, error and omissions insurance, D&O insurance, etc.
Cost The public liability insurance policy costs less since it only provides coverage for the loss, damage or injury caused to the public due to the act of a business. The liability policy is more expensive compared to the public liability policy. It offers coverage for general liability insurance, including public liability policy, comprehensive liability policy, professional liability policy, error and omission insurance and director and officers insurance.
Range The public liability policy is a type of liability policy. Every liability policy is not a public liability policy.
Right Insurance General liability insurance is more expensive than public liability policy. Therefore, at the inception of a business, an individual may avoid purchasing general liability insurance due to its expensive nature. Instead, he must buy public liability policy as a significant claim is likely to arise from the public. As the business expands and starts making significant profits, it must not solely dependent on the public liability policy. The fast-growing business is more prone to lawsuits and claims arising from investors, public, clients, shareholders, etc. Moreover, it may also receive claims from the employees. Hence, it must understand the essence of public liability vs. liability insurance and purchase general liability insurance to obtain more coverage.
Coverage The coverage of public liability is limited. Every claim of the public liability policies is explicitly or directly related to the public. In this circumstance, the business needs a professional liability policy. Liability policy offers coverage for several claims including public liability claims. 
Example of Coverage For example, if a bodily injury is caused to a person roaming around the construction site, the public liability policy may settle the claim. However, if the client is not satisfied with the construction work, the public liability policy shall not provide any damage. For example, if a claim arises for reputational harm or property damage from the public, the liability policy shall remain in force. In addition, if a claim arises from the client of a professional person or shareholder of a company, the insured may approach the insurer under a liability policy. Hence, one must comprehend the essence of public liability vs. liability insurance before purchasing an insurance policy.
Case Laws Bhopal Gas Tragedy also known as Union Carbide Corporation vs. Union Of India is a case of public liability. The case is primarily known as the Bhopal disaster that took place on 03 December 1984 on a winter night. Due to the chemical reaction in the plant, the deadly gas methyl isocyanate was released which resulted in the demise of 3000 people in the town. As a result, the Public Liability Insurance Act 1991 came into force to avoid such tragedies in the future. Following are the case laws on liability policy in order to understand the significance of public liability vs. liability insurance. 
  • NEO Foods Pvt. Ltd. v. Commissioner of Central Tax, Bangalore North West Commissionerate
  • Primacy Industries Ltd. v. Commissioner of Central Excise and Services Tax

Conclusion

One must understand the significance of public liability vs. liability insurance before buying a policy. The public liability policy offers coverage against a claim raised by a member of the public. At the same time, the liability policy covers losses that come under the purview of a comprehensive liability policy.

Written By: PolicyBazaar - Updated: 25 January 2024
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Policybazaar for Business - Comprehensive Liability Insurance - Customer Reviews
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4.3 March 28, 2023
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3.8 March 16, 2023
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4 February 12, 2023
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