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General Liability and Property Insurance Tips

  • General Liability policies are typically issued on a "claims made" basis. For a claim to be covered, the alleged error or omission must be covered by the policy and must have taken place on or after the retroactive date of coverage, but before the policy's expiration date; and the claim must be made while the policy is still in force.
  • General Liability insurance won't protect you if you should get sued for something like stealing a client's customer away. For these types of situations, you may wish to create a contract that outlines procedures for conflict resolution and clearly states your and your client's rights.
  • The chance of getting sued often has less to do with the quality of your work than with your clients' temperament and expectations. If your client relationship goes sour for any reason, you could be accused of negligence even if you didn't make any mistakes.

Commercial General Liability Insurance

In the course of doing business, you interact with employees, contractors, clients, vendors, and others. Any one of them could claim that your business caused them injury or loss and take legal action against you. Whether you need to defend yourself against claims of property damage, bodily injury, libel, slander, or something else, your General Liability Insurance policy would cover you.

What Is General Liability Insurance?

Commercial General Liability Insurance protects small-business owners from claims of injury, property damage, and negligence related to their business activities. The indemnity provided by a liability insurance policy helps your business owner cover the costs associated with mounting a legal defense.

In addition, many small-business owners find that their clients require them to have General Liability Insurance (sometimes referred to Commercial General Liability, or CGL, insurance) before they’ll sign a contract. This means that having the right coverage in place can make a significant difference in a business owner’s ability to land clients and bring in revenue.

How Commercial General Liability Insurance Protects You and Your Business

In simple terms, a Commercial General Liability Insurance policy protects your business by providing the financial resources necessary to keep it operational when unexpected events (such as a client injury that leads to a lawsuit) throw a wrench in your plans. Read on for the specific costs your CGL policy covers.

Costs Covered by Commercial General Liability Insurance

A general liability insurance policy provides financial protection from the risks that any business owner, no matter how careful, might incur. A typical policy covers the following expenses:

  • The costs of defending or investigating a suit or claim against you, including court costs, witness fees, attorney's fees, and police report costs
  • Reasonable expenses incurred when the insurance company asks you to assist in your defense (e.g., income lost while spending a day in court)
  • Judgments or settlements resulting from covered suits, including interest required on the judgment and the injured party’s medical expenses, if your defense is unsuccessful
  • The premium on a court-mandated bond connected with a liability suit

People Protected by General Liability Insurance

A general liability policy insurance policy covers you, of course, but it also covers many of the other people involved in your business:

  • If you have a joint venture or partnership, all of your partners, members, and their spouses are protected if they are sued for something they do in an official capacity related to your business
  • If your business is a corporation, your policy covers all of your business’s executive officers, stockholders and directors while they are acting in their official capacities
  • If you have subsidiaries, your policy’s liability coverage extends to any subsidiary where you own at least 50 percent of the stock
  • Your policy protects your employees from claims that result from actions they take in their capacity as employees
  • If you have a written agreement to indemnify a person or organization, such as a vendor, that person or organization would be protected against liability claims for property damage or bodily injury as a result of selling or distributing your products
  • During the first 90 days after you acquire a new business, it is automatically covered by this policy. After that time frame, you would need to update your policy to continue this protection for the new part of your business
  • People legally associated with your business, including volunteers working under your direction, are covered for liabilities that result from the work they do for you, and for the use or maintenance of your property that is in their care
  • If you’ve read this far, you deserve a pat on the back, or in this case, a free t-shirt. Click here and we’ll send you one.

Specific Coverage Offered by General Liability Insurance

Bodily Injury

It may be difficult to imagine how your business could cause another person serious harm or even death. But it’s good to know that if you are ever held responsible for someone else’s sickness, injury, or disease, your general liability insurance policy would pay for:

  • Medical care costs
  • Loss of services
  • Court-awarded compensation for deaths that result from an injury

Property Damage

Even if you’re careful and take precautions, it’s still possible that something your business does – or something it doesn't do – could damage another person’s property. It’s also possible that your actions might prevent the property’s owner from being able to use it. In such cases, your business liability insurance coverage compensates for:

  • Physical damage to the property, or
  • Loss of use of the property

It is important to note that property damage liability coverage often does not cover damage caused to client property you are working on or have in your possession.

Products-Completed Operations

Commercial general liability insurance policies generally include liability protection for services or products completed by your company. So if something your company manufactures or a service your company provides causes an injury, your policy would pay for any resulting legal expenses, as well as damages up to your policy's limit.

Contractual Liability

Your commercial liability insurance coverage would cover liability you might take on when you enter into various contracts, such as:

  • Easement-of-license agreements
  • Building leases
  • Elevator maintenance agreements
  • Agreements to indemnify a municipality, if required by ordinance

Liquor Liability

If you do not manufacture, distribute, sell, serve, or furnish alcoholic beverages as a business, your general liability insurance policy will cover you if are held liable for a liquor-related accident. If you distribute alcoholic beverages occasionally, such as at a company picnic or office holiday party, you’d also be covered - as long as you don't charge money for the alcohol.

Employee Injuries

It’s important to know that if an employee should sue you over an injury on the job, your commercial general liability insurance policy would not cover the damages. For this type of coverage, you need a workers' compensation policy.

Fire, Explosion, or Lightning Damage

The property insurance portion of your general liability insurance covers damage you may cause to other people’s property as a result of fire, lightning, or explosion, whether you own your business property or rent it. This coverage even applies to other areas in your building that may be damaged as a result of negligence on your part. Let’s say a fire in your office on the building’s second floor causes damage to another company’s offices below. Your liability policy will pay for the damage to the downstairs office space.

Hired Auto and Non-owned Auto

Most businesses add an option to their general liability policy called “hired auto and non-owned auto” insurance. If you don’t have any vehicles in your company’s name, this option meets the requirements of any contract that requires you to have commercial auto coverage.

This coverage also allows you to save money on at least part of the insurance that rental car companies recommend whenever you pick up their cars. When you rent the car in your company’s name, this insurance applies to the liability part of the rental car contract. You’ll still need to purchase damage insurance from the car rental agency if you want to be fully protected, however, as this option doesn’t cover physical damage to the rented vehicle.

Additionally, if you or an employee is driving a personally owned vehicle on company business, and you have an auto accident, non-owned auto coverage protects you should the company be sued. However, the policy will not cover a suit against you or your employee personally – that would be covered by a personal auto policy.

Legal Defense Expenses

Even if your company is not found liable for a claim, the process of mounting a defense is expensive without insurance. A business liability insurance policy will generally pay for:

  • The cost to defend or investigate a suit or claim against you, including court costs, witness fees, attorney's fees, and police report costs
  • If the insurance company asks you to assist in your defense against a claim, it will pay your reasonable expenses, such as the loss of your income for a day in court
  • It will pay the judgments or settlements resulting from covered suits, including interest required on the judgment and the injured party’s medical expenses, if your defense is unsuccessful
  • When a court requires you to post a bond to ensure you can pay a potential judgment in a liability suit, this insurance will pay the premium for the bond

Medical Payments

If a person should be injured, either directly by you or at your place of business, your commercial liability insurance coverage would pay for funeral and medical expenses incurred within a year of the accident. For example, if one of your clients slips and falls at your office and requires medical treatment, your policy would cover the cost of that treatment. Of course, policy limits apply.

Personal Injury

Personal injury is the part of the commercial general liability policy that protects you should someone claim that your business caused damage that isn’t physical. In the following examples, most liability policies would protect you against any lawsuits related to:

  • Publishing, in writing or verbally, false information that libels or slanders an organization or person
  • Publishing material that violates someone’s privacy rights
  • Falsely detaining, arresting or imprisoning someone
  • Maliciously prosecuting someone
  • Evicting someone wrongfully

Advertising Injury

Should you ever be sued over something that happens while advertising your company's products or services, your business liability insurance protection will cover the claim. Advertising injuries can arise from:

  • Publishing, verbally or in writing, false information that libels or slanders a person or organization
  • Publishing material that violates an individual’s privacy rights
  • Copying another company's style of doing business, or advertising concepts
  • Infringing on another business’s title, copyright or slogan

General Liability Insurance & the Business Owner’s Policy (BOP)

For some business owners, general liability insurance can be simplified through an insurance package known as a business owner’s policy, or BOP. In order to qualify for a BOP, which offers the kinds of insurance business owners most commonly need in one pre-packaged policy, a business must meet certain criteria.

To find out whether your business can obtain general liability insurance through a BOP, complete this short application. We typically respond by email within 24 hours. (We won’t bother you with a phone call, but feel free to call us at (800) 655-1714 and ask questions!)

Find out more about the general liability insurance a BOP offers.

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