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Why SMEs Should Consider Public Liability Insurance?

Malaysian public liability insurance is extremely important for a business, regardless of whether it’s a retail business or an administration office. When SME owners open their doors to the public, this naturally opens up them up to the possibilities of potential liability for a slips, falls and accidents. This is where public liability insurance could really provide a cushion for any curve ball damages or losses of customers that need to be compensated. 

What is Public Liability Insurance?

Public liability insurance is extremely important for the above businesses simply due to the high level of exposure to the public. Also known as business liability insurance, this insurance is essentially an insurance policy that covers damages or injury of the customer or client as a result of your business activity with them. This could involve a customer slipping on a wet floor at one of your business’s or poor lighting resulting in someone falling down a staircase.

Conditions like these as well as worn out carpeting, narrow winded stairs and faulty electrical wires are just a few examples of situations that could cause customers injury or damage.

Another example of negligence caused by a business owner could take place in a hardware store. If a can of paint were to fall on to the ground, and caused a customer to slip and suffer an injury, the customer would have the right to sue the hardware store under the basis of damage due to negligence.

The list goes on for the possible types of public liability claims, which is why public liability policies should be considered no matter the size of your business. For a third party to hold you responsible, the main requirement is to prove negligence on the part of the business owner. 

Public liability insurance extends to covering the legal action cost and compensation claims if a case made against your business is lost. This happens when and if a third-party is injured due to negligence that happened in your business premises.

For example;

(a)   Beauty saloons. If hair straighteners that were left switched on have incidentally burnt your customers, and thus causing bodily injury, you are technically liable as negligence falls on you.

(b) F&B such as Restaurant and Cafes. These trades have a high level of exposure to public. Public Liability Insurance covers you in case of being sued due to bodily injury or third party property damage.

Purchasing Business Liability Insurance in Malaysia

Malaysian public liability policies generally cover three areas of risk.

(a)   Premises/ Office Risk:

Commonly purchased by business owners, this policy covers third-party bodily injury or third-party property arising out of business operation such as offices, restaurants, trade office, etc.

(b) Contract Risks:

When a contractor is awarded a contract, it is stated in the clauses of the contract that the public liability must be purchased by the contractor for a certain amount, be it as a separate policy or add on in Section 2 of the contractor all risk policy. A majority of the time, the contractor all risk policy would absorb the cost of insurance premium of Section 2 of the public liability policies.

However, certain cases such as mall renovation for a certain outlet requires two different insurance policies to start the project. In this instance, the cost of renovation of an outlet is RM 40,000.00 while public liability coverage required by the mall operator would usually be at least a Million Ringgit.

(C) Premises and Operations including Work Away Risk

This type of public insurance is applicable to air-conditioning maintenance companies or companies in the similar line of works. It is important that the policyholder inform the insurance company of any new locations added to the policy for it to be an effective coverage. For example, if an air-conditioning maintenance has been done at a client location, then the maintenance company is liable in the event of any bodily injury or property damage incurs due to the defect in the air conditioning maintenance program.

How can Public Liability be purchased?

(a)   Premises/Office Risk

The company would need to fill up an application and/or proposal form based on the nature of business, in order for the insurance company to proceed with the insurance coverage.

(b) Contract Risks

The contractor would need to present the letter of award from the principal company that states the requirements of the public liability sum insured of the project. An insurance cover note would then be issued accordingly for presentation to the principal company for the immediate start of contract works.

(C) Premises and Operations including Work Away Risk

Apart from presenting a complete proposal form, the insured would also need to present the company profile, technical profile and etc., of the works done in order to get a good rate from the insurance company.

Below are a few scenarios where public liability insurance is claimable: 

  •   You leave a box lying on the floor in your shop and a customer trips over, thus causing an injury;
  •   Your employee spills a drink in a café and a customer slips over this, thus causing an injury;
  •   A customer falls down a flight of stairs in your factory because the handrail is broken, thus causing an injury;
  •    Whilst carrying out some carpentry repairs at a client’s office, you leave a plane on the floor that causes an employee to trip over, thus causing an injury that leads to a damage claim against you;
  •    If a tile drops of a roof that your company is repairing drops, and causes a death to a passer-by because sufficient care had not been taken by your employees to secure them; or,
  •   You knock over a valuable antique when carrying in a carpet you are fitting at a customer’s home.

Generally, the claim process for public liability insurance is similar to other insurance claims processes involving a claim form, a police report when required and an incident report.

Additionally, Malaysia public liability cases are often comprised of court cases since bodily injury claims are involved. It is of utmost importance that once a third-party makes a claim either for bodily injury or through a lawyer, the client would need to inform the insurance company immediately. By doing so, the insurance company would appoint a lawyer to represent them.