The Right Commercial Liability Protection for You and Your Customers

 

If someone falls while visiting your business, or if a customer is hurt by a product you sell, you can be held responsible. That’s the risk business liability insurance covers.

 

In a survey by the National Federation of Independent Business (NFIB), 30 percent of small business owners ranked the cost and availability of liability insurance as their second most important insurance concern. (Health insurance ranked first; workers’ compensation ranked third.)

 

Liability insurance, also called commercial general liability (CGL), covers four categories of events for which you could be held responsible:

• bodily injury
• damage to others’ property
• personal injury including slander and libel
• and false or misleading advertising

CGL coverage pays for the injured party’s medical expenses. Coverage excludes employees as they should be protected by workers’ compensation insurance. Bear in mind even trespassers can sue if they are hurt on your business premises.

 

CGL insurance typically covers three types of legal damages for which you may be sued:

• Compensatory damages, financial losses suffered by the injured party and future losses they may suffer as a result of an injury;
• General damages, non-monetary losses suffered by the injured party, such as “pain and suffering” or “mental anguish;” and
• Punitive damages, additional penalties and charges assessed against you or your business to deter future bad behavior.

Standard CGL insurance does not protect your business against the following:

• Claims of sexual harassment, wrongful termination of employees, failure to employ or promote, or race and gender lawsuits. These and other employee-related claims must be covered by employment practices liability coverage. The cost of employment practices liability insurance depends on specific factors such as number employees and whether the company has been sued in the past. These plans also cover legal fees associated with defending a related lawsuit.
• Claims related to operating a vehicle. If your business owns vehicles, you will need separate commercial vehicle coverage to protect against accident-related liability claims.
• Employee claims for work-related injury or loss. Such losses typically are covered by workers' compensation insurance. Note that business owners, independent contractors, domestic employees in private homes, farm workers and unpaid volunteers typically are exempt from workers’ compensation eligibility.
• Professional liability for errors and omissions such as failure to provide appropriate advice, errors in the delivery of professional services causing harm and failure to meet professional standards of practice.

Other types of business liability insurance covers more specialized needs:

• Professional liability or errors and omissions insurance, coverage for wrongful practices by professional service providers (e.g., healthcare providers, lawyers and consultants);
• Medical professional liability insurance, sometimes called medical malpractice, which protects physicians and other licensed health care professionals from liability associated with wrongful practices resulting in bodily injury, medical expenses and property damage, as well as the cost of defending lawsuits related to such claims;
• Crime insurance protection against burglary, theft and malicious damage, such as employee embezzlement;
• Cyber liability insurance that covers web-based businesses for damages caused by computer hackers and viruses;
• Intellectual property insurance, that covers copyright, trademark or patent infringement claims stemming from your company's operation.
• Umbrella business liability insurance for extra protection above a standard CGL policy. Coverage limits typically range from $1 million to $5 million and are appropriate for business owners with large assets or who may be especially vulnerable to lawsuits.

Premiums for business liability coverage depend on the type of product or service provided and the perceived level of risk.

 

General Liability Insurance Tips and Considerations

• Liability insurance premiums are typically linked to a business’ sales and payroll estimates provided prior to policy inception. If actual salse or payroll amounts are higher than when the policy has been issued, the business owner may be required to pay an incremental premium. If amounts are less than estimated, the insured may be entitled to a refund.
• The type of business greatly influences liability premiums. For example, a toy manufacturer might be assessed premiums of as much as $3 per $1,000 in sales, or $30,000 on $10 million in annual revenue. But a company in a less risky business such as a florist may pay only $1.50 per $1,000 of sales, or $15,000 in premiums.
• The amount of risk assigned to a business for liability coverage is based on numerous factors, including number of claims filed within an industry or probability of a claim for a similar type of company; the financial stability and longevity of the business; state laws; business products and/or operations; and the business’ approach to preventing risks.
• Businesses with solid, documented safety practices in place may be assessed lower risk and charged lower premiums.