Business Liability 101: The Ultimate Guide to Insurance

If you own a business, you will likely purchase liability insurance to protect against any legally enforceable obligation. In other words, insurance that will pay or render service on your behalf for loss arising out of legal liability to others.

Like most people, you likely deal with confusion surrounding the various types of liability insurance available to businesses.

Let’s review five essential liability products available to protect businesses of all types.

General Liability

Most business owners are familiar with general liability because it serves as a backbone of protection for most companies.

General liability insurance, often referred to as GL or CGL, protects businesses against liability claims for bodily injury (BI) and property damage (PD) arising out of:

  • Premises
  • Operations
  • Products
  • Completed Operations
  • Advertising and Personal Injury Liability

A common type of general liability claim is slip and fall. In this case, a third party would sue for injuries sustained on a business’s premises caused by a slip and fall.

Professional Liability

Professional liability is a type of liability coverage designed to protect professionals, such as accountants, attorneys, and insurance agents.

You will often hear professional liability referred to as errors and omissions, or E&O, because it protects against liability incurred due to errors and omissions in performing the professional service.

Although there are a few exceptions, most professional liability policies only cover economic or financial losses suffered by third parties. Professional liability will sometimes cover BI and PD claims, also known as contingent bodily injury or property damage, for professionals such as physicians, architects, and engineers.

It’s also important to remember that most professional liability policies are written with claims-made coverage triggers. You can find videos on our YouTube channel about claims-made policies.

Employers’ Liability

Most business owners are familiar with workers’ compensation insurance, but how about employers’ liability insurance? Did you know that the second part of the workers’ compensation policy provides employers’ liability?

Employers’ liability provides coverage to the insured (employer), for liability to employees for work-related bodily injury or disease other than liability imposed on the employer by a workers’ compensation law.

Consider this scenario.

Any employee of the insured employer sustains injuries while working in construction. The injuries are severe, and the workers’ compensation policy pays for the injured employee’s medical expenses and income replacement. The insurance company also provides disability because the employee cannot return to work.

But what about the family?

The employee was the breadwinner and supported their family. Since work is no longer viable, and extra resources are needed to care for the injured worker, the family seeks damages from the employer.

In this situation, employers’ liability provides coverage to the insured to pay the family for their losses.

Business Automobile Liability

The business auto policy contains two main parts: auto liability and auto physical damage coverage.

For those that use automobiles as part of their business, business auto liability is critical protection to cover BI and PD losses to a third party while operating the vehicle. It is crucial to keep in mind that various symbols may apply to an insured’s business auto liability protection. Examples include symbol 1 (any auto) or symbol 7 (schedule autos).

I can tell you first-hand that at our agency, we receive more business auto claims than any other line of insurance. There is an inherent risk to driving, and state laws require that everyone purchase auto liability insurance to drive legally.

When seeking business auto liability insurance, consider the need for hired liability insurance and non-owned liability insurance. You can check out our YouTube channel for more information on these essential coverages.

Management Liability

Finally, we have management liability. In our experience, it’s becoming more common for businesses to secure management liability. Examples include directors’ and officers’ liability insurance (D&O), employment practices liability insurance (EPLI), fiduciary liability, and crime insurance (kidnap, ransom, extortion).

Management liability covers exposures faced by directors, officers, managers, and business entities that arise from governance, finance, benefits, and management activities. You may also hear management liability referred to as “executive liability insurance.”

Like professional liability insurance, management liability is commonly written on a claims-made basis. Understanding claims-made policies and coverage triggers are essential before purchasing a management liability policy.

EPLI is an essential coverage to consider as a business owner. EPLI covers wrongful acts arising from the employment process, such as wrongful termination, discrimination, sexual harassment, and retaliation. 

The policy can also cover other inappropriate workplace conduct, including defamation, invasion of privacy, and failure to promote.

If you have an EPLI policy, read it! EPLI policies contain lots of sub-limits and exclusions. Understand your protection to best cover your business.

Now that you have a better scope of Liability Insurance, we are here to continue to advise you on matters relating to your business. Click to start a quote today and connect with one of our associates for assistance.

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