Why Public Liability Isn't Enough for Contractors

Introduction

Public liability insurance is often seen as the bare minimum for contractors. It's the policy that covers you when someone gets injured on your site or their property is damaged because of your work. But here's the uncomfortable truth: relying solely on public liability insurance leaves your contracting business dangerously exposed to financial ruin.

Every year, contractors face claims that fall outside their public liability coverage. Equipment worth thousands disappears from job sites. Workers suffer injuries that trigger employment law claims. A mistake in your workmanship costs a client £50,000 to rectify, and public liability won't touch it. These aren't rare scenarios—they're everyday risks in the contracting industry.

This blog explores why public liability insurance, while essential, is only one piece of a comprehensive protection strategy. We'll examine the gaps it leaves, the types of claims contractors face regularly, and the additional policies that create a proper safety net for your business.

What Public Liability Insurance Actually Covers

Before we discuss what's missing, let's clarify what public liability does cover. This policy protects you when a third party—a client, member of the public, or someone else—suffers bodily injury or property damage as a direct result of your business operations.

Typical scenarios covered include:

• A member of the public slips on your wet floor and breaks their leg

• Your scaffolding accidentally damages a neighbouring property

• A passer-by is struck by debris from your demolition work

• A client's property is damaged during your installation work

• Someone suffers an allergic reaction to materials you've used

Public liability covers your legal liability, including compensation payments, legal fees, and defence costs. For most contractors, it's a legal requirement if you work on client premises or anywhere the public might be affected.

However, public liability has strict boundaries. It only covers third-party claims—not your own employees, not your own property, and not claims arising from your professional advice or workmanship quality.

The Critical Gaps in Public Liability Coverage

Gap 1: Professional Indemnity and Workmanship Claims

One of the biggest gaps in public liability is workmanship and design liability. If you're a contractor who provides any element of design, specification, or professional advice—and most do—public liability won't cover you when something goes wrong.

Consider this scenario: You're a heating engineer who specifies a boiler system for a commercial kitchen. You design the layout, recommend the equipment, and oversee installation. Six months later, the system fails catastrophically, causing £40,000 in business interruption losses and equipment damage. The client sues you for negligent specification.

Your public liability policy will reject this claim. Why? Because it's a professional indemnity issue, not a public liability issue. The damage didn't result from an accident during your work—it resulted from an error in your professional judgment.

This gap affects:

• Builders and architects who design elements of projects

• Engineers who specify systems and equipment

• Plumbers who design heating or drainage systems

• Electricians who design electrical installations

• Any contractor providing advice or specifications

The costs of rectifying workmanship errors can be substantial. A structural error in brickwork might require an entire wall to be rebuilt. An electrical installation fault could necessitate complete rewiring. These costs fall entirely on you if you don't have professional indemnity insurance.

Gap 2: Employers' Liability and Employee Injuries

Here's something that shocks many contractors: public liability doesn't cover your own employees. If one of your workers is injured on site, public liability won't pay for their treatment, lost wages, or compensation.

This is where employers' liability insurance comes in—and it's legally required if you have any employees at all. But many contractors operate as sole traders or small partnerships and underestimate this risk.

An employee injured on your site might claim:

• Medical expenses and rehabilitation costs

• Loss of earnings during recovery

• Permanent disability compensation

• Psychological injury from the incident

• Legal costs for pursuing the claim

A serious injury can result in claims exceeding £100,000. Without employers' liability insurance, you're personally liable for every penny. This can bankrupt a small contracting business overnight.

Even worse, if you're found to have breached health and safety regulations, you could face criminal prosecution in addition to civil claims. The Health and Safety Executive (HSE) can impose unlimited fines on businesses that fail to protect their workers.

Gap 3: Tools, Equipment, and Stock Theft

Contractors invest heavily in tools and equipment. A typical tradesman might have £5,000–£20,000 worth of equipment. For larger contractors, this figure runs into hundreds of thousands.

Public liability insurance doesn't cover theft of your own tools and equipment. If someone breaks into your van and steals your power tools, or if equipment goes missing from a job site, public liability won't reimburse you.

This gap is particularly problematic because:

• Tools are frequently targeted by thieves

• Job sites are inherently insecure environments

• Equipment replacement costs are high

• Losing tools means losing income while you replace them

A single incident—tools stolen from a van overnight—can cost £3,000–£10,000 to replace. Without appropriate coverage, this comes directly out of your profits.

Gap 4: Contract Works and Damage to Client Property

Here's a nuance that catches many contractors off guard. If you damage a client's property during your work, public liability might cover it—but only if it's accidental and unrelated to the work itself.

However, if the damage is directly related to your work or results from your workmanship, it's often excluded. For example:

• You're installing new windows and accidentally damage the client's plasterwork during removal

• You're redecorating and spill paint on expensive flooring

• You're carrying out structural work and accidentally crack a load-bearing wall

These aren't accidents in the traditional sense—they're consequences of your work. Public liability often excludes them because they're considered part of your contractual obligation to complete work properly.

Contract works insurance (or contract indemnity) covers damage to the client's property that occurs during your work. It protects you against claims for damage that's your responsibility to rectify under your contract terms.

Gap 5: Business Interruption and Loss of Income

Contractors often face situations where they can't work due to circumstances beyond their control. A fire at your workshop, theft of equipment, or damage to your premises can halt your operations for weeks or months.

Public liability doesn't cover your lost income during this period. If you can't work, you're not earning. For contractors without financial reserves, this can be catastrophic.

Business interruption insurance covers your lost profits and ongoing expenses (like rent, utilities, and employee wages) if you can't operate due to an insured event. It's particularly important for contractors who work from home or operate from rented premises.

Gap 6: Legal Liability Beyond Third-Party Injury

Public liability focuses on bodily injury and property damage. But contractors face other types of legal liability:

• Defective products liability: If you supply materials or products that cause injury or damage

• Pollution liability: If your work causes environmental contamination

• Directors' and officers' liability: If you're a limited company and face claims related to management decisions

• Employment practices liability: Claims from employees regarding discrimination, wrongful termination, or harassment

These specialized liabilities require specific insurance policies beyond standard public liability.

The Real Cost of Underinsurance

Underinsurance isn't just about having a gap in coverage—it's about the financial consequences when that gap becomes a problem.

Consider a realistic scenario: You're a self-employed builder. You have public liability insurance with a £6 million limit. One day, a client's employee is injured on your site due to a fall caused by poor site management. They claim £80,000 in compensation.

Your public liability covers it. But then the client also claims £120,000 for business interruption caused by the site closure. Your public liability won't cover this because it's not direct bodily injury or property damage—it's consequential loss.

You're now liable for £120,000 out of pocket. If you don't have this cash available, you might need to:

• Liquidate your business assets

• Take out a personal loan

• Declare bankruptcy

• Lose your home if the claim is pursued personally

This scenario plays out regularly in the contracting industry. Contractors who thought they were "fully insured" discover too late that they weren't.

What Contractors Actually Need

A proper insurance strategy for contractors typically includes:

1. Public Liability Insurance Covers third-party bodily injury and property damage. Essential and often legally required.

2. Employers' Liability Insurance Legally required if you have employees. Covers employee injuries and related claims.

3. Professional Indemnity Insurance Essential if you provide any design, specification, or professional advice. Covers errors and omissions in your professional work.

4. Tools and Equipment Insurance Covers theft, loss, and damage to your tools and equipment. Protects your investment in equipment.

5. Contract Works Insurance Covers damage to client property during your work. Protects you against contractual liability claims.

6. Business Interruption Insurance Covers lost income if you can't operate due to an insured event. Protects your cash flow during disruptions.

7. Cyber Insurance (for larger contractors) Covers data breaches, ransomware, and cyber-attacks. Increasingly important as contractors use digital systems.

8. Directors' and Officers' Liability (for limited companies) Covers claims against company directors and officers. Protects personal assets of company leadership.

How to Assess Your Insurance Needs

Every contracting business is different. Your insurance needs depend on:

• Type of work: Plumbing, electrical, carpentry, and structural work all carry different risks

• Scale of operations: Solo traders have different needs than contractors with 50 employees

• Client base: Working on residential properties versus commercial projects versus industrial sites

• Contractual obligations: Some clients require specific insurance minimums

• Geographic location: Working in Wales, London, or rural areas carries different risk profiles

The best approach is to review your specific circumstances with an insurance specialist who understands the contracting industry. They can identify gaps in your current coverage and recommend appropriate policies.

Common Misconceptions About Contractor Insurance

Misconception 1: "I have public liability, so I'm fully covered" False. Public liability is essential but covers only a portion of your risks.

Misconception 2: "I don't need employers' liability because I'm self-employed" True for sole traders with no employees, but if you ever hire anyone, you need it.

Misconception 3: "My client's insurance will cover damage to their property" Possibly, but you'll likely still face a claim from them. Your insurance protects you from that claim.

Misconception 4: "Insurance is too expensive for a small contractor" Comprehensive insurance for contractors is often more affordable than many expect. The cost of a single uninsured claim far exceeds annual premiums.

Misconception 5: "I can claim everything under public liability" No. Public liability has strict exclusions. Attempting to claim outside its scope will result in rejection.

Choosing the Right Insurance Provider

Not all insurance providers understand contractor risks equally. When selecting a provider, look for:

• Industry experience: They should understand contracting risks specifically

• Flexible policies: Policies tailored to your type of contracting work

• Reasonable claims process: Quick, straightforward claims handling

• Competitive pricing: Especially important for small contractors

• Expert support: Access to advisors who understand your business

Insure24 specializes in contractor insurance and understands the specific risks contractors face. We work with contractors across all trades—from plumbers and electricians to builders and specialists—to create comprehensive protection strategies.

Taking Action: Your Next Steps

If you're currently relying solely on public liability insurance, now is the time to review your coverage. Here's what to do:

1. List your risks: Write down the types of claims your business could realistically face

2. Review your current policies: Check what each policy actually covers

3. Identify gaps: Determine which risks aren't covered

4. Get specialist advice: Contact an insurance broker who understands contractor risks

5. Implement comprehensive coverage: Add policies to cover identified gaps

Don't wait for a claim to discover you're underinsured. The cost of comprehensive insurance is minimal compared to the cost of a single uninsured claim.

Conclusion

Public liability insurance is essential for contractors. But it's not enough. It covers only a fraction of the risks your business faces. Workmanship errors, employee injuries, equipment theft, and contractual liability can all result in claims that public liability won't cover.

The contractors who thrive are those who take a comprehensive approach to insurance. They understand their risks, implement appropriate coverage, and sleep soundly knowing they're protected.

Your business is too important to leave to chance. Review your insurance today, identify the gaps, and implement a comprehensive protection strategy. The cost is minimal. The peace of mind is invaluable.

Ready to discuss your contractor insurance needs? Contact Insure24 today for a free consultation. We'll review your specific circumstances and recommend the right coverage for your business.