Public liability limits, and how they get chosen badly

Public liability limits cluster at one, two, five and ten million, and the number a business carries is usually the number some customer’s procurement form asked for, years ago. That is a defensible way to satisfy a contract and a poor way to size a risk.

What sets the real number

Serious injury claims are driven by care costs and lost earnings over a lifetime, not by the severity of the incident as it felt on the day. A catastrophic injury to a young, high-earning claimant can exceed five million on its own, before defence costs, and defence costs on a contested liability claim are rarely small.

The question worth asking is not what the contract requires. It is what the worst plausible incident on your worst site would cost, and whether the limit covers it with room for the legal bill.

The cost of moving up

Limits are not priced linearly. Going from two million to five million is usually a modest increase, because the extra layer is rarely reached. Businesses routinely discover the upgrade costs less than they assumed and had been carrying the lower limit out of inertia.