Purpose of General Liability Insurance and What all it covers?
General liability insurance is also known by another name as business liability insurance. It is a coverage that protects you from a number of claims including bodily injury, property damage, personal injury and all others that can occur due to your business operations.
The main purpose of the general liability insurance is to cover the payments for damages that the company is liable for and also to cover legal expenses for its defense. These policies cover the acts that happen due to carelessness and result in property damage or personal or bodily injury. Harm emerging from executive decision making or similar accusations of wrongful professional practices is not included in the general liability policy.
A General Liability Insurance policy helps to cover the cost of claims being faced by your business for situations like:
1. Third Party Bodily Injury – A person can make a bodily injury claim against your business if he is injured on your business property. For example, a package delivery man slips on loose carpeting in your company office, falling down and breaking his left wrist. General Liability Insurance will help in covering the costs of the bodily injury claim he makes against your company for this incident.
2. Third Party Property Damage – You may face a property damage claim if you or someone from your staff damages a third party’s property. General Liability Insurance can help your business in covering the costs of property damage claims being faced by your business. For example, an employee using the equipment on your business property involuntarily damages a business office in your neighbor and the neighboring business makes a property damage claim on your business. General Liability Insurance will help to cover the costs involved in resolving this property damage claim.
3. Advertising Injury – The costs of a claim made against your business because of its promotion or advertising methods are also covered in General Liability Insurance. For example, a business in the same industry as yours accuses your business of making advertisements similar to theirs and is violating some of their terms. General Liability Insurance can help in covering the expenses your business will incur to handle this claim.
4. Reputation Harm – Sometimes a business may make a claim that your company has harmed its reputation. For example, during a TV interview about your business, you are asked to give your views on what you think of the competition in the same industry. The competitors see this interview and make a claim that your business has devalued them through those comments. General Liability Insurance will help to cover the expenses needed to resolve claims of defamation against your business.
Is Commercial General Liability Insurance Necessary?
Although Commercial General Liability Insurance is not legally needed, the policy is really needed by a lot of businesses as they do not have the financial resources to withstand a large liability claim against them. It is believed that at least 4 out of 10 small businesses will encounter a claim in the next decade. Liability claims are some of the most familiar and costly claims faced by small businesses. 10% of liability claims made against businesses comes from customer slip and fall accidents. $20,000 is the average cost for a slip and fall claim. Even more expensive is a customer injury claim. The average cost comes around $35,000. At a cost of $50,000 on average for a claim, Reputation Harm claim is the most expensive liability claim. You will have to spend money on these claims from your own business and personal assets in case you don’t have a General Liability Insurance.
If you don’t have proof that you have sufficient business insurance coverage, larger companies may refuse to work with your business. General Liability Insurance is one of the most important coverages that these companies will consider before working with your business. They want to make sure that the companies they engage with are capable of completing the work. Most probably you will go out of business leaving the contracting company in trouble in case a liability claim is made against your business, and you don’t have a General Liability Insurance.
Certainly, no company owner plans on acting negligently or incautiously but still, accidents may happen anytime anywhere. Even the most cautious company owners can make a mistake. Moreover, your business can be sued if even you’ve not made any mistake. This is the reason that you should have a General Liability Insurance. It also helps to deal with the bulk of the work associated with a claim. The insurance company helps in handling most of the legal procedures, which allows you to keep your business running smoothly.
Some common cases of General Liability Insurance related lawsuits
1. Property damage lawsuit – A contractor is installing a new bathtub. Unfortunately, one of his co-workers forgets to turn off the tap and floods the bathroom by mistake. The water gets into the floor and walls of the basement. The owner of the house sues the contractor for $150,000 in damages to his house.
2. Slip-and-fall accident – A market store is sued when a produce delivery man slips on the wet floor of the freshly mopped area in the store. His deliverables go flying everywhere, but the actual damage is done to the delivery man’s backbone, which he is hurt while falling down. He sues the store owner for $90,000 in medical costs, lost wages, and other expenses.
3. Customer injury lawsuit – A professional photographer is shooting candid photos for a wedding couple. As the couple walks, the bride stumbles over a cord for the camera set up and falls down, damaging her ankle. The couple sues the photographer for $70,000 in medical damages.
4. Product liability lawsuit – A sporting goods making company is sued for $400,000 when the equipment they sold breaks and injures a customer.
The insurance company would be responsible for the cost of the lawsuit, paying for a lawyer to help out the company and covering the final verdict or compensation in the case, in all the above-mentioned lawsuits. The judgment is when the judge or jury rules on a dollar amount you owe the party accusing your business. However, some cases are resolved before that point. Settlements occur when both parties willingly agree on an estimate of losses out of court. One of the advantages of having insurance is that the insurance company often helps businesses in settling their lawsuits. The insurance company can pay for a settlement, which will help you save time (and extra money) in the courtroom and get you back to business.