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Professional liability vs general liability insurance: What Australian businesses need to know

When protecting your Australian business, understanding the distinction between professional liability insurance and general liability insurance is crucial. Many business owners, particularly in professional services, mistakenly believe one type of coverage protects against all business risks. However, these two insurance types serve distinctly different purposes and protect against entirely different categories of claims. 

What is professional liability insurance?

Professional liability insurance, also known as professional indemnity insurance in Australia, protects businesses against claims arising from professional services, advice, or expertise provided to clients. This coverage is essential for any business that provides professional services, consultations, or specialised advice. 

Core protection areas

Professional liability insurance covers:

  • Negligent acts in providing professional services

  • Errors and omissions in work delivered

  • Failure to deliver promised services or results

  • Breach of professional duty or standards

  • Misrepresentation of professional capabilities

  • Violation of confidentiality or privacy obligations

Who needs professional liability insurance?

Industry sector

Typical professionals

Common risk exposures

Financial services

Accountants, financial advisors, brokers

Incorrect advice, calculation errors, compliance failures

Healthcare

Doctors, dentists, psychologists

Misdiagnosis, treatment errors, and privacy breaches

Legal services

Lawyers, solicitors, legal consultants

Missed deadlines, incorrect advice, conflict of interest

Technology

IT consultants, software developers

System failures, data breaches, pand roject delays 

Engineering / Architecture

Engineers, architects, surveyors

Design flaws, calculation errors, safety oversights

Consulting

Management consultants, business advisors

Poor recommendations, strategic failures, and confidentiality breaches

What is general liability insurance?

General liability insurance, also called public liability insurance in Australia, protects businesses against claims for bodily injury and property damage that occur during normal business operations. This coverage addresses physical incidents rather than professional service failures.

Core protection areas

General liability insurance covers:

  • Bodily injury to third parties on your premises

  • Property damage caused by your business operations

  • Product liability for physical harm from products sold

  • Personal and advertising injury claims

  • Medical expenses for injured third parties

  • Legal defence costs for covered claims

Common general liability scenarios

Incident type

Example situation

Coverage response

Slip and fall

Client slips on a wet floor in the office

Medical expenses, legal costs, settlements

Property damage

Employee accidentally damages the client's property

Repair/replacement costs, legal defence 

Product defect

The product sold causes physical injury

Medical costs, legal expenses, damages

Advertising injury

Accused of copyright infringement in marketing

Legal defence, settlement costs 

 

Key differences: professional liability vs general liability

Coverage scope comparison

The table below highlights some of the typical differences between professional liability and general liability insurance. However, it is important to note that these are generalisations, and there can be exceptions depending on the specific policy wording. For clarity and to ensure you fully understand your cover, it is best to review your policy documents or consult with your broker or insurance adviser. In rare cases, general liability policies may also be claims-made, so seeking professional advice is recommended to fully understand your cover options.
 

Aspect

Professional liability

General liability

Primary focus

Professional services and advice

Physical injury and property damage

Claim types

Errors, omissions, and negligent acts

Bodily injury, property damage

Policy basis

Claims-made (when the claim is filed)

Occurrence (when the incident happens)

Retroactive coverage

Often included for past work

Not applicable

Defence costs

Often paid in addition to limits, but sometimes included.

Usually included within the limits

Industry specificity

Highly specialized by profession

Standard across industries

Real-world examples of the differences

Professional liability scenarios:

  • An accountant makes a calculation error, costing the client $50,000 in tax penalties
  • A software developer's coding mistake causes a client's system to crash for three days
  • An architect's design flaw requires expensive building modifications
  • A financial advisor recommends unsuitable investments, causing the client losses

General liability scenarios:

  • A client trips over cables in your office and breaks their wrist
  • Your employee spills coffee on a client's expensive laptop
  • A delivery person damages a client's front door while making a delivery
  • Someone claims your advertisement uses their copyrighted material

Why many businesses need both types of coverage

Most professional service businesses face both professional and general liability risks, making dual coverage essential for complete protection.

Professional services business risk matrix

Risk category

Professional liability

General liability

Coverage gap without both

Service delivery

✓ Covers errors/omissions

✗ No coverage

Professional mistakes unprotected

Physical premises

✗ No coverage

✓ Covers injuries/damage

Visitor injuries unprotected

Product sales

✗ Limited coverage

✓ Covers physical harm

Product defects unprotected

Professional advice

✓ Covers advice errors

✗ No coverage

Bad advice claims unprotected

Data/Privacy

✓ Often covers breaches

✗ No coverage

Privacy violations unprotected

Industry-specific considerations

Accounting and financial services

Professional liability needs:

  • Tax preparation errors and omissions
  • Financial planning and investment advice mistakes
  • Audit and compliance failures
  • Confidentiality breaches

 

General liability needs:

  • Client injuries during office visits
  • Property damage during client site visits

Healthcare professionals

Professional liability needs:

  • Medical malpractice claims
  • Misdiagnosis or treatment errors
  • Privacy and confidentiality violations
  • Professional standard breaches

 

General liability needs:

  • Patient injuries in clinical settings
  • Property damage in medical facilities
  • Premises liability for office operations

Technology and IT services

Professional liability needs:

  • Software errors and system failures
  • Project delays and performance failures
  • Intellectual property violations

 

General Liability Needs:

  • Equipment damage during installations
  • Injuries during on-site service delivery
  • Property damage from technical work
  • General business operations liability

Cost considerations and budgeting

Premium cost factors

Factor

Professional liability

General liability

Primary cost driver

Revenue and services provided

Business operations and premises

Risk assessment

Service complexity and claims history

Physical operations and safety record

Coverage limits

$250,000 - $10 million+

$10 million - $20 million typical

Combined coverage benefits

Potential advantages of package policy: 

  • Combined policies could see packaged savings.
  • Simplified administration with a single insurer
  • Coordinated coverage, reducing gaps and overlaps
  • Streamlined claims handling for complex incidents

Choosing the right coverage combination

Coverage assessment framework

Step 1: Risk identification

  • List all professional services provided
  • Identify physical business operations 
  • Assess client interaction types
  • Evaluate product/service delivery methods

Step 2: Coverage requirement analysis
 

Business aspect

Professional liability priority

General liability priority

Consulting services

High

Low-Medium

Client office visits

Medium

High

Physical products

Low

High

Professional advice

High

Low

Public premises

Low

High

Data handling

High

Low

Step 3: Coverage limit determination

  • Assess the largest potential claim scenarios
  • Consider client contract requirements
  • Review industry standard practices
  • Evaluate financial capacity for self-insurance

Regulatory and compliance requirements

Mandatory insurance requirements

Profession

Professional liability

General liability

Minimum limits

Medical practitioners

Recommended

Recommended

$20 million +

Legal practitioners

Mandatory

Recommended

$1.5 million +

Registered Tax Agent 

Mandatory

Recommended

$250,000 +

Certified Practicing Accountant (CPA)

Mandatory

Recommended

5 million +

Engineers

Often required

Recommended

$5million +

Architects

Usually required

Recommended

$5 million +

Client contract requirements

Common contract clauses:

  • Minimum insurance coverage amounts
  • Additional insured requirements 
  • Certificate of insurance provisions
  • Claims notification procedures
  • Policy maintenance obligations

Claims management and response

Professional liability claims process

Key response steps:
  • Immediate notification to the insurer upon awareness
  • Complete an incident report immediately.
  • Preserve all documentation related to the claim
  • Avoid admissions of liability or fault
  • Cooperate fully with the insurer's investigation
  • Maintain confidentiality throughout the process

General liability claims process

Response protocol:
  • Secure the incident scene and ensure safety
  • Document everything, including photos and witness statements
  • Complete an incident report immediately.
  • Notify authorities if required by law
  • Report to insurer within required timeframes 
  • Provide ongoing cooperation with the claim investigation

Emerging risk considerations

Modern professional risks

Cyber and data risks:
  • Professional liability policies increasingly include cyber coverage
  • Data breach notification costs and penalties
  • Business interruption from cyber incidents
  • Regulatory fines and penalties


Technology integration risks:

  • AI and automation errors in professional services
  • Cloud computing and data storage issues
  • Social media and digital marketing mistakes
  • Remote work and virtual service delivery challenges

Evolving general liability exposures

Modern business operations:

  • Increased premises security concerns
  • Product liability in digital products
  • Environmental liability considerations
  • Employment practices and workplace safety

Conclusion

Understanding the fundamental differences between professional liability and general liability insurance is essential for Australian businesses, particularly those providing professional services. While professional liability insurance protects against errors, omissions, and negligent acts in service delivery, general liability insurance covers bodily injury and property damage from business operations.

Most professional service businesses need both types of coverage to ensure comprehensive protection. Professional liability insurance addresses the specialised risks inherent in providing advice, expertise, and professional services, while general liability insurance covers the everyday operational risks that any business faces when interacting with clients and the public. 

The distinction between these coverage types isn't just academic, it's practical and financial. A single incident could potentially trigger both types of coverage or fall into coverage gaps if you don't have appropriate protection. The cost of comprehensive coverage is minimal compared to the potential financial impact of an uninsured claim. 

When evaluating your insurance needs, consider your specific business operations, client requirements, regulatory obligations, and risk tolerance. Work with experienced insurance professionals who understand both your industry and the Australian insurance market to design a coverage program that provides complete protection for your business.

Remember that insurance requirements evolve with your business. Regular reviews ensure your coverage keeps pace with changing operations, emerging risks, and growing exposure.

Take action today to assess your current coverage, identify any gaps, and ensure your business has the comprehensive protection it needs to thrive in Australia's competitive marketplace. 

Frequently asked questions

General liability insurance is typically occurrence-based, meaning the policy responds to claims if the incident happened while the policy was active, regardless of when the claim is made. As long as the policy was in effect at the time of the incident, it can provide coverage even if the policy has since been canceled or expired. 

Professional indemnity insurance is usually claims-made, which means the policy must be active both at the time the incident occurs and when the claim is first made or notified. If the professional indemnity policy is canceled or lapses, it generally won't cover claims made after that point, even if the incident happened while the policy was in force. 

Having only one type of coverage can leave significant gaps. For example, without professional indemnity insurance, you might not be protected against service-related claims made after your policy lapses, and without general liability insurance, you could be exposed to claims related to physical injury or property damage. 

In summary, understanding these differences helps ensure you are adequately protecting your business against a wide range of risks. 

General liability typically uses occurrence-based coverage (protects against incidents that happen during the policy period, regardless of when claims are filed). Professional liability usually uses claims-made coverage (protects against claims first made during the policy period). This difference affects how coverage applies over time.

Even home-based professionals typically need both coverages. Professional liability protects against service errors, while general liability covers client injuries in your home office or property damage during client meetings. Your homeowner's insurance likely excludes business-related claims.

When a claim involves both professional services and physical damage, both policies may respond. For example, if an accountant's error leads to a client confrontation resulting in property damage, professional liability might cover the financial error while general liability covers the property damage. Coordination between insurers ensures appropriate coverage.

Yes, many insurers offer combined professional indemnity and general liability policies that can combine multiple coverages. These packages often provide better coverage coordination, though standalone policies may offer more specialised protection.

Claims falling outside both policies create coverage gaps that expose you to personal financial liability. This emphasises the importance of comprehensive risk assessment and potentially additional coverage like employment practices liability, cyber liability, or directors and officers insurance.

Absolutely. High-risk professional services (medical, legal, financial) require substantial professional liability coverage. Businesses with significant public interaction or physical operations need robust general liability protection. Technology companies often need both plus specialized cyber coverage.

Professional liability often has higher deductibles ($1,000-$25,000) because claims tend to be larger and more complex. General liability typically has lower deductibles ($250-$5,000) for more frequent, smaller claims. Higher deductibles reduce premiums but increase your out-of-pocket exposure.

Yes, client contracts often require both types of coverage with specific minimum limits. Professional associations may mandate professional liability insurance, while commercial leases typically require general liability coverage. Some industries have regulatory requirements for both types.

Notify both insurers immediately via your insurance broker or advisor when facing any potential claim. Let the insurance companies determine coverage applicability rather than trying to categorise the claim yourself. Quick notification protects your rights under both policies and helps ensure proper claim handling from the start.

References

  1. Marsh Australia: https://www.au.marsh.com/
  2. AIG Australia: https://www.aig.com.au/
  3. QBE: https://www.qbe.com.au/
  4. Allianz: https://www.allianz.com.au/
  5. CPA Australia: https://www.cpaaustralia.com.au/
  6. ASIC: https://asic.gov.au/
  7. Australian Government Treasury: https://treasury.gov.au/
  8. Insurance Council of Australia: https://insurancecouncil.com.au/
  9. Australian Prudential Regulation Authority: https://www.apra.gov.au/

Marsh Advantage Insurance Pty Ltd (ABN 31 081 358 303, AFSL 238369) (“Marsh”) arranges the general insurance (i.e. not the Discretionary Trust Arrangement) and is not the insurer. This page contains general information and does not take into account your individual objectives, financial situation or needs. For full details of the terms, conditions and limitations of the covers, refer to the specific policy wordings and/or Product Disclosure Statements available from Marsh on request. Marsh makes no representation or warranty concerning the application of policy wordings or the financial condition or solvency of insurers or re-insurers. Marsh makes no assurances regarding the availability, cost, or terms of insurance coverage. Any statements concerning actuarial, tax, accounting, or legal matters are based solely on our experience as insurance brokers and risk consultants and are not to be relied upon as actuarial, accounting, tax, or legal advice, for which you should consult your own professional advisors. The Discretionary Trust Arrangement is issued by the Trustee, JLT Group Services Pty Ltd (ABN 26 004 485 214, AFSL 417964) (“JGS”). Any advice or dealing in relation to the Discretionary Trust Arrangement is provided by JLT Risk Solutions Pty Ltd (ABN 69 009 098 864, AFSL 226 827) (“JLT”). JGS and JLT are businesses of Marsh McLennan. The cover provided by the Discretionary Trust Arrangement is subject to the Trustee’s discretion and/or the relevant policy terms, conditions and exclusions.

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