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Dental, Medical and Veterinarian practices will commonly consider a range of business insurance covers to protect them against the cost of Property Damage and certain Financial Liability risks.  Amongst the list of many covers to consider are 3 types that cause confusion, because of their similarities in their name.  They include :

1. Professional Indemnity Insurance
2. Public Liability Insurance, and
3. Product Liability insurance

Some practice owners worry that there is overlap if more than one of the covers is held. And others may think they have all 3 covers, but only have one or two.

This article aims to help you understand each type better and to explain their differences. The information provided below is general in nature to provide a broad understanding. Each insurer and policy will have unique policy wording noted in their Product Disclosure Statement (PDS) and Policy Schedules.  You should consider the wording of each insurer’s PDS to see if their product meets your own specific needs, goals and circumstances.

Let’s start with a few classic examples of a type of claim under each category.

Examples :

Professional Indemnity Insurance Example :

1. You are a dentist that conducts dental treatment on a patient.  The work is faulty, causes unnecessary pain, and financial compensation is requried to be paid. The policy may respond and pay for legal and compensation costs as required.

Public Liability Insurance Examples :

1. Example 1 (client injury) : You own a Dental Surgery and a patient is in your waiting area.  They walk to grab a magazine to read in the waiting room and slip on a wet floor that has been unattended to.  They suffer bodily damage and financial compensation is required to be paid to the patient. The insurance cover can fund the cost of the response.
2. Example 2 (non-client injury) : Similar to the example above, you are a dentist and a patient and their partner are in your waiting area.  The partner, who is not a patient, slips and hurts himself as per above.  They suffer bodily damage and financial compensation is required to be paid to the patient.
3. Example 3 (property damage) : You are an electrician working on a client’s premises and you damage their property when you drop your hammer on their marble floor.  Compensation is required to repair the property damage and the policy may fund that.

Product Liability Insurance Example :

1. You manufacture environmentally friendly coffee mugs.  There is a defective part on some mugs that causes the main container to fall off the handle. This happens and a customer is burned from the hot liquid causing bodily harm, Compensation is required to be paid.

What Are Some Similarities Across The 3 Types Of Covers ? :

1. All of the insurance covers are designed to offer protection relating to the activities of a business (but for different aspects)
2. Each provides protection against claims from “third parties” (ie not claims to your own self or your own property).
3. Each may include coverage both for “third party” Compensation (payments to an injured person) and for your own legal defence costs (to defend you from allegations in a claim brought against your business)
4. All types of cover could respond to claims for Personal (bodily) Damage (eg injury), but which will respond will be based on the reason for the damage.

What Are Some Differences Across The 3 Types Of Covers ? :

1. One difference between Professional Indemnity cover and Public Liability Cover is that the latter may pay a claim for a “Non-Customer” (eg a family member of a customer who attends your medical practice with the customer, or a supplier delivering something to your business). Professional Indemnity Insurance claims are almost always only related to clients involving a fiduciary duty that you owe to them.
2. For a professional services occupation – like a dentist – it is unlikely to see a Professional Indemnity Insurance policy respond to a claim related to Property Damage, but this could be seen with Public Liability cover.
3. In many instances, Public Liability and Professional Indemnity Insurance are differentiated by way of policy exclusions. For example, Public Liability might have exclusions around Professional Services, and Professional Indemnity policies can have exclusions related to bodily injury unrelated to professional service provided (eg a slip and fall). This is why both are covers are commonly needed.
4. Both Public and Products Liability provide coverage for third party injury or third party property damage that you might cause. The difference is that Public Liability relates to injury or property damage whilst you’re on the job, and Products Liability relates to injury or damage caused by any Products you distribute, supply or manufacture.
5. Product Liability cover responds to claims from incidents that happen after physical possession of such Products has been relinquished to others (third parties).
6. Product Liability will not provide cover if your business provides professional advice or a professional service, and a client alleges your advice or service caused them a financial loss. A Professional Indemnity Insurance policy is the type of insurance which is intended to cover claims of this nature.
7. Note that injuries to your own employees at the workplace are in turn catered for by yet another type of cover, which is Workers Compensation insurance.

Can You Obtain All 3 Types Of Cover In A Bundle Under One Policy ? :

1. Product and Public Liability are commonly sold as a bundled policy issued by an insurer – but they can be bought separately in some instances.
2. Professional Indemnity Insurance is usually sold on its own.  But for some industries, some insurers may offer a bundle for all 3 covers.

The following are not typically covered by Public Liability Insurance:

1. Injuries to your employees
2. Damage to your own property
3. Costs of rectifying faulty workmanship
4. Professional negligence
5. Contractual liability
6. Events occurring before or after the policy period
7. Claims from patients of contractors/associates that use your business premises

Professional Indemnity Insurance will typically not provide cover for:

1. Intentional damage
2. Contractual liabilities
3. A refund of Professional fees
4. Known claims and circumstances prior to the insurance commencing
5. Fraud and dishonesty

Product Liability insurance will typically not provider cover for :

1. Product recalls
2. If you sell a Product and it doesn’t work, resulting in another business losing money.
3. Typically, policies also won’t provide cover for the Product So if you sell a Product and the Product does not work and has to be replaced, the policy won’t respond.

This is general information that is not based on any personal needs, goals or circumstances.  Contact us to find out more and always read the Product Disclosure Statement (PDS issued by the insurer before considering buying insurance.  The PDS and associated policy schedule will note the coverage provided by a policy. Information is current as at 6 October 2023.

General insurance services are provided by Experien General Insurance Services Pty Ltd ABN 77 151 269 279 AFS Licence No. 430190 (EGIS) trading as Experien Insurance Services. For Dental Professional Indemnity Insurance, EGIS is an agent of an insurer and is not an insurer.