A:

When you see the term "public liability" attached to a business, its products or its services, it refers to a specific type of legal liability that could result from injury to a member of the public while on company premises. There is an entire subsector of the insurance industry dedicated to providing various forms of public liability protection. On the other hand, legal liability describes the obligation of one party to pay a debt owed to another party.

Legal Liabilities

Legal liabilities are part of civil law and criminal law. For example, if a company commits fraudulent accounting practices or fails to comply with government labor laws, it may face charges in criminal court and will probably be forced to pay damages to concerned parties. This is a criminal legal liability.

It is also possible that a company fails to uphold its end of a contract with another party. Contract disputes are almost always civil issues, not criminal, but courts still award damages. To win damages in a civil or criminal lawsuit, the suing party must prove both the guilt and the legal liability of the alleged violator.

Public Liability Vs. Professional Indemnity

Strictly speaking, everyone has a public responsibility to not cause direct physical harm to other people or their property. This is the type of damage that public liability insurance covers. For example, a general department store like The Home Depot would carry public liability insurance in case a customer injures himself while handling tools inside of the store.

This is different from professional indemnity coverage. Professional indemnity refers to the additional responsibility accepted by a person or company that carries out a professional duty. The purpose of professional indemnity insurance is to protect against alleged breaches of professional conduct.

RELATED FAQS
  1. What kinds of liabilities appear on the balance sheet?

    Learn what current and non-current liabilities are, the difference between the two, and examples of liabilities that a company ... Read Answer >>
  2. What are the official FASB guidelines regarding contingent liabilities

    Learn how the Financial Accounting Standards Board, or FASB, treats the recognition, estimation and disclosure of contingent ... Read Answer >>
  3. How do I calculate current liabilities in Excel?

    Learn what current liabilities are and examples of a company's current liabilities, and find out how to calculate total current ... Read Answer >>
  4. How are accounts payable listed on a company's balance sheet?

    Find out how accounts payable is listed on a company's balance sheet, why it is considered a current liability, and how it ... Read Answer >>
  5. How do you calculate working capital?

    The formula for calculating working capital is straightforward, but lends great insight into the shorter-term health of a ... Read Answer >>
Related Articles
  1. Investing

    Understanding Total Liabilities

    Total liabilities are the combined debts an individual or company owes.
  2. Investing

    Reviewing Liabilities On The Balance Sheet

    As an experienced or new analyst, liabilities tell a deep story of how a company finances, plans and accounts for money it will need to pay at a future date.
  3. Insurance

    An Advisor's Guide to Prof. Liability Insurance

    A guide to what financial advisors need to know about professional liability insurance.
  4. Taxes

    What is a Tax Liability?

    Tax liability is the amount of money a person or entity owes to the government as the result of a taxable event.
  5. Small Business

    Understanding Limited Liability

    Limited liability is a legal concept that protects equity owners from personal losses due to their ownership interest in the company.
  6. Financial Advisor

    What Kind of Insurance Do RIAs Need?

    Advisors spend a lot of time discussing insurance with clients but they also need to consider their own coverage needs as small-business owners
  7. Managing Wealth

    Protect Your Assets from Liability in Illinois

    Asset protection is a fundamental part of risk management. Use these tips to protect your assets.
  8. Financial Advisor

    Series 66 Exam Prep: The Broker-Dealer

    Before you take the series 66, you need to understand civil liabilities.
  9. Small Business

    What is Unlimited Liability?

    Unlimited liability means that the owners of a business are liable for the entire amount of debt and obligations of that business.
  10. Investing

    How to Analyze a Company's Financial Position

    Find out how to calculate important ratios and compare them to market value.
RELATED TERMS
  1. Total Liabilities

    The aggregate of all debts an individual or company is liable ...
  2. Indemnity

    Indemnity is compensation for damages or loss. Indemnity, in ...
  3. Long-Term Liabilities

    In accounting, a section of the balance sheet that lists obligations ...
  4. Other Current Liabilities

    A balance sheet entry used by companies to group together current ...
  5. Other Long-Term Liabilities

    A balance sheet item that includes obligations which are not ...
  6. Limited Liability

    A type of liability that does not exceed the amount invested ...
Hot Definitions
  1. Return On Equity - ROE

    The amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation's profitability ...
  2. Bond

    A bond is a fixed income investment in which an investor loans money to an entity (corporate or governmental) that borrows ...
  3. Whole Life Insurance Policy

    A life insurance contract with level premiums that has both an insurance and an investment component. The insurance component ...
  4. Compound Annual Growth Rate - CAGR

    The Compound Annual Growth Rate (CAGR) is the mean annual growth rate of an investment over a specified period of time longer ...
  5. Capital Asset Pricing Model - CAPM

    A model that describes the relationship between risk and expected return and that is used in the pricing of risky securities. ...
  6. Internal Rate Of Return - IRR

    A metric used in capital budgeting measuring the profitability of potential investments.
Trading Center