Unfortunately for every business owner, the chances of getting sued have dramatically increased in the last decade. General Liability insurance can prevent a legal suit from turning into a financial disaster by providing financial protection in case your business is ever sued or held legally responsible for some injury or damage.
General Liability pays losses arising from real or alleged bodily injury, property damage, or personal injury on your business premises or arising from your operations.
If you have a personal umbrella liability policy, there’s generally an exclusion for business-related liability. Make sure you have sufficient auto liability coverage.
Broad Range of General Liability Protection:
- Bodily Injury, including the cost of care, the loss of services, and the restitution for any death that results from injury
- Property Damage coverage for the physical damage to property of others or the loss of use of that property
- Products-Completed Operations provides liability protection (damages and legal expenses up to your policy’s limit) if an injury ever resulted from something your company made or service your company provided
- Products Liability is a more specialized product liability insurance that protects your company against lawsuits from product-related injury or accidents
- Contractual Liability extends to any liability you may assume by entering into a variety of contracts
- Other coverage includes: Reasonable Use of Force; Borrowed Equipment; Liquor Liability; Non-Owned Vehicles (such as aircraft and watercraft); Fire, Lightning or Explosion Damage; Water Damage Liability Protection; Legal Defense Costs; Medical Payments; Personal Injury; Advertising Injury; and specialized liability protection for specific business types
As a business owner, you need the same kinds of insurance coverages for the car you use in your business as you do for a car used for personal travel — liability, collision and comprehensive, medical payments (known as personal injury protection in some states) and coverage for uninsured motorists. In fact, many business people use the same vehicle for both business and pleasure. If the vehicle is owned by the business, make sure the name of the business appears on the policy as the “principal insured” rather than your name. This will avoid possible confusion in the event that you need to file a claim or a claim is filed against you.
Whether you need to buy a business auto insurance policy will depend on the kind of driving you do. Your Fleming and Riles agent will assess how you use vehicles in your business, who will be driving them and whether employees, if you have them, are likely to be driving their own cars for your business.
While the major coverages are the same, a business auto policy differs from a personal auto policy in many technical respects. Give us a call and we can explain all the differences and options.
Workers compensation laws were created to ensure that employees who are injured on the job are provided with fixed monetary awards. This eliminates the need for litigation and creates an easier process for the employee. It also helps control the financial risks for employers since many states limit the amount an injured employee can recover from an employer.
Workers Compensation Insurance is designed to help companies pay these benefits. As a protection for employees, most states require that employers carry some form of Workers Compensation Insurance. Workers Compensation Insurance is not health insurance. Workers Compensation is designed specifically for injuries sustained on the job.
In most states, if you have employees, you are required to carry Workers Compensation coverage. Even in non-mandatory states, it can be a very good idea, particularly if you have many employees, or if they are engaged in hazardous activities.
Do I Need Workers’ Compensation Insurance?
Employers have a legal responsibility to their employees to make the workplace safe. However, accidents happen even when every reasonable safety measure has been taken.
To protect employers from lawsuits resulting from workplace accidents and to provide medical care and compensation for lost income to employees hurt in workplace accidents, in almost every state, businesses are required to buy workers compensation insurance. Workers compensation insurance covers workers injured on the job, whether they’re hurt on the workplace premises or elsewhere, or in auto accidents while on business. It also covers work-related illnesses.
Workers compensation provides payments to injured workers, without regard to who was at fault in the accident, for time lost from work and for medical and rehabilitation services. It also provides death benefits to surviving spouses and dependents.
Each state has different laws governing the amount and duration of lost income benefits, the provision of medical and rehabilitation services and how the system is administered. For example, in most states there are regulations that cover whether the worker or employer can choose the doctor who treats the injuries and how disputes about benefits are resolved.
Workers compensation insurance must be bought as a separate policy. Although in-home business and business owners policies (BOPs) are sold as package policies, they don’t include coverage for workers’ injuries.
The Builders Risk Policy is designed to provide coverage for direct loss or damage from covered causes of loss to buildings and structures under construction. The form applies to new construction as well as to renovations, remodeling, and improvements to existing buildings. This is one of two coverage approaches for construction and renovation risks. The other is provided by a variety of Inland Marine coverage forms. While these forms are basically similar to one another, each takes a different approach to providing the coverage.
If you own and/or run a smaller business, your insurance needs may be properly handled by a Business Owner Policy, or “BOP.” BOPs are similar to a homeowners policy, offering both property and liability protection. Businesses such as retailers, wholesalers, small contractors, artisan contractors, dry cleaners, restaurants, offices, and convenience stores (including those with gas pumps) are eligible for BOP coverage. All such operations may be insured by a BOP as long as they are not larger than 25,000 square feet in total floor area or have gross annual sales greater than $3,000,000 (per location). More restrictive guidelines typically apply to businesses that include cooking operations. Naturally, there are certain situations that are not covered by a BOP. For instance, there is no coverage for losses involving most vehicles, money and securities, illegal property (contraband), land, water, growing crops or lawns, or watercraft. A BOP may be supplemented to provide additional protection. Property coverage options include adding insurance for accounts receivable, valuable papers and records, earthquake, spoilage, etc. Liability coverage can be expanded to handle additional business interests, limited vehicle liability, losses related to personnel situations, liquor liability, and injuries to leased employees.
What Do BOPs Cover?
BOPs protect buildings as well as other features such as additions (completed or being built), indoor and outdoor fixtures, machinery and equipment, landlord furnishings, and maintenance property (such as mowers, snowblowers, ladders, etc). BOPs also cover outdoor furniture, floor coverings, and appliances used for refrigerating, ventilating, cooking, dishwashing, and laundering. The building coverage also applies to materials, equipment, supplies and temporary structures located near the insured premises. The policy’s protection applies whether the property is located inside or immediately outside the covered buildings. Business personal property (such as office equipment, copiers, desks, etc.) includes property you own, lease or control (i.e., borrow or control) as long as the property is used by the business.
Business owners liability coverage provides comprehensive protection for claims or suits made by other parties. Its liability section covers losses involving injury to other persons or damage to property that belongs to others. It also provides limited protection against personal injury (slander or libel), advertising injury, and losses involving an operation’s products or services.
What’s Not Covered
Naturally, there are certain situations that are not covered by a BOP. For instance, there is no coverage for losses involving most vehicles, money and securities, illegal property (contraband), land, water, growing crops or lawns, or watercraft. A BOP may be supplemented with additional standalone coverage to provide additional protection. Property coverage options include adding insurance for accounts receivable, valuable papers and records, earthquake, spoilage, etc. Liability coverage can be expanded to handle additional business interests, limited vehicle liability, losses related to personnel situations, liquor liability, and injuries to leased employees.
Commercial property policy provides coverage for real and personal property that is used in a business. An “all-risk,” worldwide policy covering business property. Protecting the insured’s real and business personal property must be a primary goal of any commercial insurance program. Regardless of the size of the business, tangible property usually represents a large portion of its total assets. As a result, it should always be reviewed and used for comparison when evaluating any commercial property coverage form.
If your business is incorporated, does it have a board of directors and corporate officers? Do you serve on a board of directors?
If the answer is yes to either question, you could be exposed to lawsuits from shareholders. They may sue you, alleging that you committed acts that reduced the corporation’s value. Lawsuits may also arise out of employee practices, allegations of conflicting interests, and from providing information to the investing public.
Decisions made by directors and officers impact the viability and value of a corporation. The current issues of accounting practices, financial reporting, and the use of corporate assets have resulted in an increase of lawsuits being filed against executive boards. Directors and officers (D&O) coverage should be considered a necessity for corporate entities. D&O coverage supplements the protection provided by general liability policies since the former responds to legal actions filed by shareholders, customers, scorned merger partners, and creditors.
Corporate directors must take steps to determine whether D&O coverage exists. If D&O coverage is in place, boards should also determine the amount of coverage available for handling defense costs. Any amounts paid for legal costs are subtracted from the overall policy limits and are not a separate coverage. Criminal acts are not covered by D&O insurance. However, the cost of providing a legal defense until criminality is determined may be covered. In the past it was common for a director facing a lawsuit to have any related expenses handled by a corporation’s operating funds. Today such agreements have little value, especially for operations facing bankruptcy or those that cease operation.
The increase in shareholder lawsuits has created a much tighter market, the application is typically completed by one or two key executives. Both the applicant board and the insurance carrier rely upon the accuracy of the information provided by the persons completing the application. A problem arises because of how an insurer relies on the information. Typically, the insurer treats the information given by one or two persons as though it were received by all of the persons on the board. Insurers often either deny coverage or deny claims when there is evidence that the information is inaccurate. In other words, fraud or errors caused by an individual officer or director could eliminate coverage for all other directors and officers.
When coverage is not available or if it is denied, a director or officer may face the financial nightmare of having to handle his or her own legal expenses and costs of an award. Therefore, it is very important to take care that a D&O policy provides the anticipated protection. It is also important that a board takes steps to oversee the application process and to make sure that the provided information is accurate. Another step may to look for D&O coverage that offers separate coverage to directors and officers so innocent parties do not have their protection stripped away due to the deliberate, false actions of others.
Is it legal to terminate the following employees?
- A driver with a bad driving record
- An employee who is rude to your customers
- An employee who swears at customers
Don’t think that the answer is simply “yes.” A business’ action may depend upon circumstances such as whether an employee’s duties involve driving a company vehicle or directly involves customers and if the company can prove that such behavior fails to meet the applicable job standards.
Why Businesses Need EPLI
Hiring and firing practices have become legal minefields that have spurred the development of Employment Practices Liability Insurance (EPLI). EPLI is specifically designed to protect employers from lawsuits brought on by employees, providing coverage for many situations that general liability insurance does not.
According to industry experts, unpaid internships, illegal background checks, and issues related to pregnancy and health are the top trending employment practices litigation cases. The cost of claims is rising, as is the length of time it takes to resolve EPLI claim. Even lawsuits that are thrown out of court or are won by your company are expensive, due to the high cost of securing legal defense. Because of this, EPLI insurance coverage is very important as financial protection for your business.
Policies and premiums for this type of coverage vary tremendously among insurers. Many companies offering the coverage also offer assistance in writing policy and procedure manuals and other ways to reduce the potential for claims involving sexual harassment, wrongful termination, or discrimination. No business is immune from these claims.
Protecting Against Employee Lawsuits
It is important that a business has clear policies that are applied consistently to each employee and that directly relate to their job.
Having access to legal counsel that has expertise in this special area of the law is a key aspect of protection. Another key issue is documenting the essential job functions and establishing measurable standards for each position. Use of regular performance reviews and applying the standards equally to each employee is a smart employment practice. The best defense against employment practice claims is to know the law in your state and then having policies and procedures that meet or exceed its legal standards.
The U.S. Department of Labor offers a Small Business Handbook from their Website at http://www.dol.gov. The U.S. Equal Employment Opportunity Commission also offers numerous publications addressing different employment laws from their website at http://www.eeoc.gov.
Like a business or a homeowner, a nonprofit organization needs to protect its property from loss in a fire, by theft, or from many other hazards. Nonprofits can be lawsuit targets as well. Without insurance, a lawsuit could prove financially devastating.
Similarly, nonprofits have no immunity from lawsuits. Clients, volunteers, vendors, donors, or visitors may sue if they are accidentally injured on your premises or while on business for the organization. Someone may sue claiming libel or slander. Employees may sue claiming discrimination or sexual harassment. Liability insurance covers these risks.
Before buying insurance, it’s a good idea to consider the particular loss exposures you have and buy a policy that addresses them. If, for example, your organization is made up mostly of volunteers and has no paid staff, your best choice could be a policy that covers only volunteers.
Business Auto Insurance
Vehicles owned by a nonprofit organization will need to be insured with a business auto policy.
Anyone driving a personal auto on business for a nonprofit organization will have coverage under their personal auto liability policy. If the personal policy has low limits, however, they could quickly be exhausted by an accident with serious injuries. An injured party might then sue the nonprofit group. You should discuss with us whether the organization is adequately protected.
There are many aspects to property insurance. If your organization owns real estate, you will want to insure the property. If it rents or leases its premises, you may want coverage for tenant’s improvements and betterments. These are fixtures, alterations, installations, or additions that you have put into the space that cannot legally be removed from the landlord’s premises.
Depending on the particulars of your activity, you may want to add other coverages, such as theft and burglary, employee dishonesty, or electronic data loss.
Professionals, such as doctors, lawyers and accountants, have long been held highly accountable for the consequences of their decisions. While such professions are still the “Big Three,” there are a growing number of other occupations that represent an exposure to liability loss that needs special protection, including pharmacists, architects, engineers, opticians, beauticians, insurance agents, consultants, and many others.
In most instances, a type of coverage called a commercial general liability policy will protect a business against the damage or injury their actions may cause to others. However, this type policy is designed to handle routine, fairly generic, and low-risk activities. Examples are customers who cut their hands on a sharp edge of an office’s reception desk or a customer who is hurt when she collides with a clerk who is stocking a shelf. Much more is at stake with professional activities.