Small Business Liability Insurance
Do I need liability insurance for my business?
A good liability risk policy can help mitigate the chance that your business will be sued. As careful as we may try to be, mistakes happen that might result in an injury to someone or damages to property. Or, a mistake could harm the reputation or interfere with the privacy of a customer or client. As a result, you may be legally liable to pay damages to someone who suffers a loss due to your actions or inaction.
Depending on the degree of harm and the number of people injured and/or value of property damaged, a lawsuit could bankrupt your business. Even if your organization is cleared of any wrongdoing, a determined plaintiff can keep you tied up in legal proceedings for years, resulting in an expensive and time consuming defense. Liability insurance pays the cost of your defense, protects your assets, and lets you stay focused on your business.
What policy is right for me?
For small businesses the most efficient and least expensive way to purchase liability insurance is usually as part of the Business Owners Policy (BOP) property and liability insurance in one contract.
Under a BOP, your insurance pay damages that you are legally obligated to pay as a result of “bodily injury,” “property damage” or “personal and advertising injury,” up to the policy limits and subject to your deductible. Punitive damages are generally not covered, although there may be some exceptions.
Bodily injury means injury, sickness, disease or death; it may include injuries that are emotional or mental, such as post traumatic stress syndrome or humiliation.
Personal and advertising injury includes libel, slander or any defamatory or disparaging material or a publication or utterance in violation of an individual's right of privacy;
infringing the privacy or copyright rights of another in your advertisement; wrongful entry or eviction, or other invasion of the right of private occupancy; and false arrest or wrongful detention.
What is covered medical expense?
For the most part, your BOP liability coverage is for situations where a third party claims you were negligent and sues for damages. The medical payments coverage is an exception, as it pays medical expenses for bodily injury to third parties that occurs on premises you own or rent or as a result of your operations regardless of fault.
Who is insured?
BOP liability coverage insures a sole proprietor, partners or partners named in the policy "Declarations," but only with respect to their duties on behalf of the business. The spouses of sole proprietors or partners are also covered. If your organization has officers and directors, they are insured, as are your stockholders, but only with respect to their duties or liabilities in connection with the business. Employees and volunteer workers are insured for acts committed within the scope of their employment in your business.
How much liability coverage is right for my business?
The amount of liability coverage a business needs depends on the perceived risk. For example, a business that manufactures or distributes engines and generators is at a greater risk of being sued than one that distributes fabric and would therefore need more liability insurance. You can usually get a good sense of lawsuits involving your type of business through your trade association.
Some of the companies with which you do business may require you to carry a specific minimum amount of liability insurance. Make sure to keep an eye on contracts with your suppliers and customers in case they have specific requirements for liability coverage.
What is difference between occurrence and claims made policies?
There are two major forms of liability insurance policies: Occurrence and Claims Made.
Occurrence Policy: An occurrence policy covers a business for harm to others caused by incidents that occurred while a policy is in force, no matter when the claim is filed. For example, a person might sue a business in 2010 for an injury stemming from an injury in 2001. The policy that was in place when the incident occurred (i.e.2001) will apply, even if the company now has a policy in place with higher limits.
Claims Made Policy: A claims made policy covers the business based on the policy that is in force when the claim is made, regardless of when the incident occurred. In the above example, the limits in the policy in effect in 2010 would apply.
Commercial Umbrella Insurance – Just In Case!
Umbrella liability insurance is an extra insurance policy that covers some expenses not covered by other liability insurance policies.
Standard business liability coverage will protect you in many situations, but when serious situations arise, umbrella liability insurance can help ensure that your business is protected. Accidents are unexpected and often unavoidable. Here are a few of the many situations that may happen:
Your business fails to provide the appropriate professional services
Your company holiday party gets out of hand resulting in property damage
Your building has a fire that results in multiple injuries and/or deaths
Cover your business with umbrella liability insurance
A business umbrella policy picks up where your business auto liability, general liability or other liability coverage exceeds its limits. Umbrella insurance is a cost-effective way to provide extra coverage against bodily injury and/or property damage.
For example, if your current policy protects your business for up to $2 million and you are successfully sued for $3 million, your business umbrella coverage can pay the outstanding $1 million. Otherwise, the difference would very likely come out of your business profits or your pocket.
It’s there when you need it
The umbrella policy only comes into play when your basic insurance policies have met maximum payouts. That means that you may go for years without having to use the umbrella policy. But, it's there in case you need it, helping to mitigate risk.
Taking the initiative to carry an umbrella insurance policy is a smart way to provide extra protection for yourself and your business.
Footnote: This is a brief overview of Commercial Umbrella Insurance. You should read a policy thoroughly before purchasing any insurance policy.
What Are The Costs If Your Business Is Impacted By A Disaster?
How quickly your business can return to full operations after a major disaster such as a tornado, a fire, or a flood often depends on emergency planning you do today!
When you also consider that the number of declared major disasters more than doubled compared to the previous decade, preparedness becomes an even more critical issue. Although each situation is unique, any organization can be better prepared if it plans carefully, puts emergency procedures in place, and practices for emergencies of all kinds.
America's businesses form the backbone of the nation's economy; small businesses alone account for more than 99% of all companies with employees, employ 50% of all private sector workers and provide nearly 45% of the nation's payroll1. Planning today will help support employees, customers, the community, the local economy and even the country. It also protects your business investment and gives your company a better chance for survival.
Ready Business outlines commonsense measures business owners and managers can take to start getting ready. The site is an excellent resource with easy-to-use templates to help you plan for your company's future. These recommendations reflect the Emergency Preparedness and Business Continuity Standard (NFPA 1600) developed by the National Fire Protection Association and endorsed by the American National Standards Institute and the Department of Homeland Security.
Business continuity and crisis management can be complex depending on the particular industry, size and scope of your business. However, putting a disaster protection and continuity plan in motion helps improves the likelihood that your company will survive and recover.
The following information is a good start for small- to mid-sized businesses. The following helps give you an idea of what it may cost to develop a disaster protection and business continuity plan. Some of what is recommended can be done at little or no cost. Use this list to get started and then consider what else you can do to help protect your people and prepare your business.
Meet with your insurance provider to review current coverage.
Create procedures to quickly evacuate. Practice the plans.
Talk to your people about the company's disaster plans. Two-way communication is central before, during and after a disaster.
Create an emergency contact list including employee emergency contact information.
Create a list of critical business contractors and others whom you will use in an emergency.
Know what kinds of emergencies might affect your company both internally and externally.
Decide in advance what you will do if your building is unusable.
Create a list of inventory and equipment, including computer hardware, software and peripherals, for insurance purposes.
Talk to utility service providers about potential alternatives and identify back-up options.
Promote family and individual preparedness among your co-workers. Include emergency preparedness information during staff meetings, in newsletters, on company intranet, periodic employee emails and other internal communications tools.
Buy a fire extinguisher and install smoke alarm.
Decide which emergency supplies the company can feasibly provide, if any, and talk to your co-workers about what supplies individuals might want to consider keeping in a personal and portable supply kit.
Set up a telephone call tree, password-protected page on the company website, email alert or call-in voice recording to communicate with employees in an emergency.
Provide first aid and CPR training to key co-workers.
Use and keep up-to-date computer anti-virus software and firewalls.
Attach equipment and cabinets to walls or other stable equipment. Place heavy or breakable objects on low shelves.
Elevate valuable inventory and electric machinery off the floor in case of flooding.
If applicable, make sure your building's HVAC system is working properly and well-maintained.
Back up your records and critical data. Keep a copy offsite.
More than $500
Consider additional insurance such as business interruption, flood or earthquake insurance.
Purchase, install and pre-wire a generator to the building's essential electrical circuits. Provide for other utility alternatives and back-up options.
Install automatic sprinkler systems, fire hoses and fire-resistant doors and walls.
Make sure your building meets standards and codes. Consider a professional engineer to evaluate the wind, fire or seismic resistance of your building.
Consider consulting with a security professional to evaluate and/or create your disaster preparedness and business continuity plan.
Upgrade your building's HVAC system to secure outdoor air intakes and increase air filter efficiency.
Send safety and key emergency response employees to trainings or conferences.
Provide a large group of employees with first aid and CPR training.
1. Source: U.S. Census Bureau, SUSB, CPS; International Trade Administration; Bureau of Labor Statistics, BED; Advocacy-funded research, Small Business GDP: Update 2002-2010, www.sba.gov/advocacy/7540/42371
The Role Of Workers’ Comp Insurance
Workers' compensation is must-have insurance for companies with employees in order to provide benefits to employees who are injured or become ill on the job.
Through this program, workers receive benefits and medical care, and employers can know that they did what they could to avoid being sued by the employee.
Workers' compensation is administered at the state level through the U.S. Department of Labor's Office of Workers' Compensation Programs. Every state requires employers to purchase workers' compensation insurance to help ensure that employees, affected by illness or injury, and their dependents, are protected against significant hardships in case of injury, illness, or death.
For the record
As an employer, ensure that your employees and management staff know that accident reports must be completed when an employee is injured or claims job-related illness. It is important to provide the claims filing forms from your chosen workers' compensation company. Also, work closely with your workers' compensation agent to help ensure that both the employee's medical needs and your liability are covered.
Follow the guidelines we provided and make sure the claims are completed thoroughly and in a timely manner. Remember, you can also contact your state workers' compensation office for help.