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Business Liability Insurance

If you are running a business, you are likely to make sure that at least two sayings are true: "To err is human" and "Heaven helps those who help themselves." It may happen that even if you provide the best quality and services, some customers may claim you did them wrong. Managing a business involves great legal responsibilities towards your customers, employees, and public in general.

You may have a legal responsibility to pay damages if you or your employees have been negligent and caused injury to your employees or members of the public. You are also at risk in case you have signed a personal guarantee for a loan; do not operate your business as a separate entity, or happened to act in an irresponsible manner. You or a member of your company can make a mistake that may injure someone or damage some property. Such mistakes could ruin the company's reputation. Depending on the degree of harm, a lawsuit could easily bankrupt your business. The legal proceedings can be very time consuming, which adds to a significant cost of your defense. Then, taking into account that about 80 % of all U.S. businesses are partnerships or sole proprietorships, this fact adds to the aspects putting your business and personal liabilities at risk.

It is necessary to identify the safety and health needs of your business activities by carrying out a risk assessment. Mind that when changes are made in your workplace, you may need to reassess the hazards, since wise business management is an ongoing process. The Health and Safety at Work Act 1974 and its associated Regulations should serve as your guide here. You may consult with an insurance representative and your industry association, as Liability Insurance is one of the most important constituent of your company's success.

Though risk is an intrinsic part of owning and operating any business and it cannot be altogether eliminated, the right Business Liability Insurance can help you manage that risk. Liability Insurance is the insurance no business can do without. Some types of Business Liability coverage may be compulsory by law. Liability Insurance will protect you from lawsuits which can result from any bodily injuries occurred on your premises caused to customers, employees, vendors, or visitors; injuries or property damage caused due to actions or negligence of your employees. Business Liability Insurance covers the cost of your defense and your assets, ensuring that your business won't cease operating.

Living in society, we are all responsible for our actions, which must not injure others. Negligence and inaction can often do as much harm and have the same sad consequences as wrongful or evil actions. Negligence is legally interpreted as a failure to exercise reasonable care. For example, if you fail to train workers how to do their jobs in a legal and safe way or fail to explain how to use a product safely, or you don't take proper care of malfunctions, and a customer or someone else is injured as a result, it is considered negligence and you will be liable for any loss or damage.

The rules for the determination of liability and damages are normally set by the law of the state where the lawsuit is filed. If the parties do not agree to settle a liability lawsuit, there will be a trial, or the parties may agree to use some alternative means of conflict resolution, for instance, arbitration.

Depending on your business needs, consider different types of Liability Insurance:

General Liability Insurance (Commercial General Liability (CGL))

This is the main coverage of Business Liability Insurance which protects your business from injury claims, advertising claims, and property damages. It also covers your business in case someone suffers injury as a result of using your service or product. This type of insurance is a "must-have," and in many cases it is a constituent part of a larger insurance package. Some Liability coverage can also include libel, slander, and infringement on intellectual property.

Professional Liability Insurance

If you are a business owner in the service industry, consider obtaining Professional Liability Insurance, also known as Errors and Omissions coverage. For a number of professions, it is a legal requirement to carry such a policy. It will protect your business from personal claims against it for malpractice, errors, negligence and omissions. For example, doctors should carry Malpractice Insurance, attorneys, accountants, financial advisors, and other professionals should have Errors and Omissions Insurance.

Product Liability Insurance

If your business sells some goods or products, check if your General Liability Insurance policy also covers Product Liability. It is wise to add this type of Liability Insurance to your package in order to protect your business in the event a person becomes injured as a result of using the product manufactured or developed by your company. The risk level and the amount of coverage you will need to purchase depend on your business type and the type of product manufactured. It is important to care for safety measures and take precautions. It will not only lower the risks of your product injuring someone, but will also play a significant role in determining your premium.

Employment Practices Liability Insurance (EPLI)

This type of Liability coverage protects business against the actions of the employer. The need for EPLI has been raised due to increase in lawsuits filed for sexual harassment, wrongful termination, discrimination and misappropriation of employee benefits. ELPI is meant to protect you employers against such claims filed by employees, former employees, or business associates. In case an employee is injured at work, this type of insurance will allow him/her to be adequately compensated and cared for without incurring excessive legal fees.

You can purchase either an "occurrence policy" or a "claims-made policy." More frequently used "claims-made policy" protects only for the period while the policy is effective. Acts occurring within a specific time period (prior-act coverage period) can be covered by Prior-act coverage. An "occurrence policy" covers claims made months or even years after the incident. Even if the claim is reported later, the insurance company reviews and pays for any claims made resulting from an incident that took place during the coverage period. Occurrence policy premiums are usually higher than claims-made premiums.

When looking for a suitable policy, a business owner should use certain tips to shop for the best Business Liability Insurance rates and coverage:

  • Assess your industry in order to get a better understanding of what coverage your business needs. Learn about recent legal actions and settlements in your industry. Make your own research and use the experience of your peers to determine the average legal costs and set your coverage limits.
  • Compare Business Liability coverage of different insurers. Pay attention to exclusions of the policies to find the best policy for your business.
  • If you belong to any trade association or business group, you have an opportunity to buy insurance at group rates, which are naturally lower.
  • Getting a package deal is cheaper than purchasing separate types of insurance from various insurers. See if a package of policies such as Business Owners Policy (BOP) can cover your business and save on premiums. Business Owner's Policy covers property insurance, business interruption insurance and general liability. However, it depends on your individual business needs and risks, if this package will be enough or requires adding separate policies, such as Professional Liability Insurance, Employee's Health Insurance, Commercial Auto Insurance etc.
  • Consider finding a specialist broker who knows your business well and has considerable experience in your field. Working with an insurance broker will help you get the best coverage and rates available. An insurance agent can also prompt you some management initiatives which are likely to prevent losses in the future.
  • Find a reputable and financially stable insurance company that will serve your business needs best.