In today’s litigious society, even small mishaps can result in large lawsuits. That’s why general liability insurance, along with property and worker’s compensation insurance, are essential for most companies. Liability insurance protects the assets of a business when it is sued for something it did (or didn’t do) to cause an injury or property damage. Also included are premises and operational liability, medical payments and contractual liability. General liability insurance can be purchased separately or as part of a business owner’s policy.
Liability insurance covers injuries that you cause to third parties. Covered liability claims include bodily injury, property damage, personal injury, and advertising injury (damage from slander or false advertising). If someone sues you for personal injuries or property damage, the cost of defending and resolving the suit would be covered by your liability insurance policy. A general liability policy will cover you for common risks, including customer injuries on your premises. Customer accidents account for the majority of all liability claims and of these, slips, trips and falls account for over 60%.
Potentially general liability coverage claims may include:
- a customer has a slip and fall accident on your premises and sues you for negligence
- you throw a cigarette in a trash can that starts a fire that causes $100,000 of damage to the landlord’s building
- your programming or code that controls a machine malfunctions resulting in bodily injury or property damage to a third party
- you make a disparaging remark about a competitor and you are sued for slander
More specialized varieties of liability insurance include:
Errors and Omissions
Errors and Omissions (E & O) insurance covers inadvertent mistakes or failures that cause injury to a third party. The act must actually be an inadvertent error, and not merely poor judgment or intentional acts. For example, an E & O policy would cover damages arising from an accountant failing to file the appropriate tax documents, or a notary filling out notarizations improperly.
Malpractice insurance, or professional liability insurance, pays for losses resulting from injuries to third parties when a professional’s conduct falls below the profession’s standard of care. For example, if a doctor makes a mistake that other doctors of his specialty would not have made, his patient might sue him. A malpractice policy will pay his defense costs and any judgment or settlement. Malpractice insurance is available for doctors, dentists, accountants, real estate agents, architects, and other professionals.
A Commercial Umbrella policy protects you against a loss due to catastrophic lawsuits by providing business liability coverage above and beyond your basic standard liability policy. Your business can be covered for $1,000,000 up to $10,000,000 or even more in special cases.
Employment Practices Liability
Employment Practices Liability provides protection against the risks related to discrimination claims, workplace harassment, wrongful termination or other employment practices.
Directors’ and Officers’ Liability Insurance
This type of insurance is generally purchased by corporations and nonprofit organizations to cover the costs of lawsuits against directors and officers.