Liability Insurance For Small Businesses
Your business can be legally liable to people injured and for property damaged because you or your employees did not use reasonable care. For example, if a customer falls on a slippery floor and then sues you, you may be liable if you negligently failed to provide safe premises.
As you probably know, when it comes to personal injuries, judges are broadening the scope of what people can sue for - and juries are increasingly generous in awarding damages. Because an injured person can collect not only for lost wages and medical bill but also for such intangible as pain, suffering and mental anguish, a single personal injury verdict against your business has the potential to wipe it out. For that reason, unless you have a very unusual business that has no personal contact with customer, suppliers or anyone else, your insurance program should include liability coverage.
Some intentional acts not involving bodily injuries are also usually covered under the liability portions of an insurance policy. Examples are libel, slander, defamation, false imprisonment and false arrest.
Liability policies are designed to protect you against lawsuit judgment up to the amount of the policy limit plus the cost of defending the lawsuit. They provide coverage for a host of common perils, including customers and guests falling and being mangled by your front door or otherwise being injured. Liability policies usually have a dollar maximum value per incidence and an aggregate dollar maximum value for the policy year. For example, your policy may say that it will pay $500,000 per occurrence for personal injury or a total of $1 million in any one-policy year.
The typical general liability policy doesn't cover punitive damages - damages intended to punish your business for willful or malicious behavior or rather than compensate the injured person. And liability coverage won't protect your business if an employee intentionally assaults a customer. In addition, a general liability policy doesn't cover injuries caused by defective products or motor vehicles, or by an employer's liability for injuries received by workers on the job.
Product liability insurance covers liability for injuries caused by products you design, manufacture or sell. You may be liable to a person injured by a defective product or one that came without adequate instructions or warnings.
Product liability insurance can be very expensive, but if your business manufactures, distributes or sells a product that may injure people, you should seriously consider buying it. For example, if you manufacture medical instruments or chemicals, you'll probably want this coverage. If you're a retailer and sell products in their original package and provide no product assemble or service or advice, your exposure is drastically reduced; the manufacturer is primarily liable and the product liability coverage provided by standard renter's commercial policies should be adequate.
The amount of product liability insurance that you need depends on the nature of your product and not on your gross sales. Obviously, a company that sells a $2 million of paper clips a year will need less coverage than a firm that manufactures gauges critical to the safe operation of heaters and also has $2 million worth of sales annually.