General Liability Insurance

General liability insurance protects businesses in situations in which incidents of property damage, personal injury or bodily harm may result in a lawsuit.  Whether or not the insured is actually guilty of causing such incidents there may be legal fees and compensations due.  Even small problems can result in large lawsuits.  In any case, general liability insurance is one of the essentials in protecting the assets of a business. 

There are two common ways to secure general liability insurance.  It can be purchased as a separate policy or part of what is called a “Business Owner’s Policy,” or BOP.  A BOP is insurance that bundles both liability insurance and property insurance into one policy.  One of the drawbacks to a BOP is that the liability coverage is often very low.  Hence, many companies opt for a separate liability insurance policy that allows for substantially greater coverage.

As in any insurance policy, the insurer accepts the risk of liability in the case of a covered claim or lawsuit against the insured.  Hence, if sued, and the insured is found responsible, the insurer is obligated to pay the legal costs of the claim or lawsuit if it is within the coverage guidelines.  This would include property damage, bodily injury, personal injury, and also what is called advertising injury, more commonly referred to as false advertising or slander.

Perceived risk…

Depending on the nature of a company’s business, it may be considered low risk, high risk, or somewhere in between.  High risk simply means that some businesses, such as ones dealing with heavy machinery or explosives, will probably be involved in more lawsuits and would require greater liability coverage.   Low risk businesses are the opposite, in which the business processes are prone to far less litigation, requiring less liability coverage.  The perceived risk is that level of risk that is associated with any particular business. 

 
The state in which you conduct business may be a factor…

Depending on the state in which a business is conducted, levels of liability insurance will vary.  Some states have a history of awarding plaintiffs higher damage amounts, and this factor may suggest that higher coverage is necessary. 

Umbrella liability insurance…

Liability insurance policies always state a limit or maximum amount of coverage that will be paid during a given time period.  They also state a limit or maximum per occurrence.  Sometimes these limits do not cover the occurrence or the time period maximum.  In circumstances of claims in which the damages exceed the limits, the insured ends up directly responsible for the balance.  To protect against circumstances such as this many companies purchase “umbrella liability insurance.”  An umbrella liability insurance policy picks up the costs where general liability coverage ends.

Ways to limit liability and reduce potential claims…

Businesses can adopt strategies and practices in order to keep incidents to a minimum and reduce the number of potential claims.  Properly training employees is a good start.  It also pays to learn from other successful businesses that use high quality control standards.  Many companies develop safety programs that make employees more aware, which reduces the number of occurrences and therefore the number of claims.