When investing in liability insurance for your business, the different coverages, terminology, and limits may seem overwhelming. Liability insurance policies can be complicated and difficult to understand.
By definition, a liability is the state of being responsible for something, especially by law. When things go wrong and a business is negligent for damages to a 3rd party, a business owner would look to a liability policy to help them indemnify, or make whole, the affected 3rd party.
The liabilities or risks a business faces can vary based on the scope and specifics of the product or service the business offers. With that said, there are common liabilities that almost all businesses face. For these common risks, almost all businesses should have a Comprehensive General Liability policy, or CGL. Here's how it works.
General Liability Insurance Policies
Most business owners start their liability insurance with a Comprehensive General Liability (CGL) policy. For smaller organizations, the coverage often comes as part of a Business Owners Policy (BOP). For larger enterprises, the CGL is purchased independently. The CGL offers several essential types of liability protection:
- Bodily Injury Coverage applies to physical bodily harm sustained by a 3rd party. The most common 3rd party bodily injury coverage is for slips and falls at a place of business or within the direct vicinity like a parking lot. This coverage can help pay for the medical costs incurred by the injured 3rd party.
- Property Damage Coverage pays when you accidentally damage someone else's belongings. For example, a landscaper runs over a rock with a lawnmower and it breaks the window of a car parked in the adjacent parking lot. The damages to the 3rd party's vehicle would be covered as property damage under the CGL.
- Personal or Advertising Injury Coverage responds to allegations for damages from events like false advertising or copyright infringement. This coverage also responds to events like false detention or imprisonment. So, if a competitor claims that your advertising unfairly targeted them, then this coverage would apply.
- Medical Payments Coverage is similar to bodily injury coverage. However, the business does not have to be at fault, or negligent, for the 3rd party injury. The covered business can often help avoid a full-scale liability claim by an injured party. Also known as "good faith" coverage, this will pay for things like x-rays, ambulance costs, stitches, or other immediate medical coverages incurred by an injured 3rd party.
- Products and Completed Operations Coverage helps protect a business for the exposure they face after their product is sold, or their services are completed. If a roof installation company is served with a lawsuit asking to pay damages caused by the collapse of a roof they installed 8 months ago, the claim would fall under their Completed Operations coverage. The policy would not pay to replace the roof itself, but all the resulting damages caused by the roof collapse.
Your Comprehensive General Liability applies to the risks likely to occur in most businesses. It helps pay for legal expenses, court costs, settlements or judgments, and related costs. This is for the common, or general liabilities a business can face. For the specifics related to your business, additional coverage or endorsements like cyber liability, employment practice liability, or liquor liability may be prudent purchases.
Work with your Ten Eyck Group team to discuss how best to protect you and your business.
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