Liability insurance is something most business simply must have. But do you really understand what it does and doesn’t cover? Whether you’re looking for your first liability insurance provider, or already have a policy in place, it’s important to know what’s provided – and what might not be. Here are some business liability insurance coverage rules of thumb.
What’s typically covered
Business is inherently risky, but business liability coverage safeguards against many known and unknown risks. General Liability insurance coverage protects you, your business and your employees from claims involving bodily injury or property damage. Policies shield you from the expense of out-of-court settlements, litigation and judgments awarded by courts.
Lawsuits, investigations and settlements
If damages are filed against you, or you’re sued, general liability insurance covers the insurance company’s investigation and attorney expenses, any judgment or settlement, medical expenses in case of injury, and bonds if they must be subsequently posted.
Claims can arise from bodily injury or property damages resulting from accidents on your premises or from your products, your operations or advertising for your business.
Liability insurance can also cover things you may not have thought about such as advertising injury in the event your company’s marketing violates someone’s copyright. Business liability insurance coverage even offers some protection against alcohol-related accidents resulting, for example, from an office holiday party (as long as your company is not in an alcohol-related business, such as the manufacture or distribution of alcohol).
What’s typically NOT covered
Don’t look to a general liability insurance policy to protect you and your business from all claims and expenses that your company might face. For example:
General liability insurance does not cover worker compensation claims if an employee is hurt on the job. Liability insurance for those claims can be purchased under a seperate worker compensation policy.
General liability insurance doesn’t include coverage for professional liability insurance claims. If you’re in the business of providing professional services to a client (such as a veterinarian, accountant or business consultant) you need professional liability insurance. This insurance covers professional mishaps that may occur as you offer your opinion, solution, service or recommendations in the course of business.
Auto related coverage
General business liability coverage is no substitute for business auto insurance. A hired auto (for cars rented for business) and non-owned auto endorsement will protect your company in case of a lawsuit, but it will not cover damage done to your owned or leased vehicles – nor will it protect you or your employee personally.
Though there can be exceptions, general business liability policies rarely pay for punitive damages resulting from a lawsuit.
General business liability insurance does not cover damages or injuries resulting from expected or intentional acts. For example, if an employee were to assault a customer, and the customer sues your business, your liability coverage would not cover the damages. But if the employee was defending himself or the company from a criminal act, the liability insurance would provide coverage.
This refers to the “workmanship” exclusion, and is common in general liability policies. Insurance policies do not respond to what would normally be picked by a company’s warranty for their work.