Even
though business owners and professionals specializing in certain
fields face some of the same risks, they need
liability
insurance to
protect them against other special risks they face.
This is particularly so since personal liability
insurance policies
do not cover losses related to business and professional activities.
Both business and professional liability policies
pay the cost of a legal defense if the insured individual or
business is sued; and they pay damages up to the limit of the policy
if the insured is found legally responsible for bodily injury or
property damage.
Businesses
need protection against claims for bodily injury and property damage
that are related to the ownership and maintenance of the business
premises, or are the result of business operations conducted both at
and away from the business premises.
Businesses
may be sued for bodily injury and property damages resulting from
faulty products or completed operations (work performed by the
business).
Businesses
may be sued if they hire independent contractors who act negligently
or perform substandard work.
Businesses
may occasionally be held liable for the negligent acts of others if
they agree in a contract to assume responsibility.
Businesses
that employ workers need protection against liability losses
resulting from claims filed by their employees. Employers may be
held liable if an employee is hurt or becomes sick as a result of
his or her job, if the employee is fired or is discriminated
against, or if the employee suffers a loss through mismanagement of
an employee benefit plan.
Businesses, especially those that manufacture certain hazardous
products, are sometimes sued if any emitted pollutants damage the
environment. Business owners can purchase environmental
insurance to
protect themselves against environmental liability.
Businesses
face many other risks that they may want to protect against, such as
product recall, liquor liability,
and steam boiler liability,
to name a few.
Business liability
insurance is
third-party insurance,
which means that damages are paid to outside individuals who file
claims, not to the insured business, business owner or employee.
Policies can be written either on a claims-made
basis or
an occurrence
basis.
Businesses may protect themselves against liability claims
and lawsuits by purchasing commercial general
liability insurance. This insurance protects
them against many of the risks businesses face, including premises
and operations, products and completed operations, and contingent liability.
Many companies buy general
liability coverage
along with other types of coverage they need, such as property insurance,
by purchasing a Commercial Package Policy (CPP). The business
chooses the types of coverage it needs, and the CPP packages them
together. Coverage typically included is general
liability, property, crime, and boiler and machinery
coverage with other specialized coverage the business needs. The general
liability section
of the CPP protects the business against claims for bodily injury
and property damage, personal injury and advertising injury, and
provides medical payments coverage to individuals injured on company
premises. This coverage can also be purchased separately as a Commercial General
Liability (CGL)
policy, which was formerly
known as Comprehensive General
Liability. Because the
CGL excludes some types of losses, businesses may also need to
purchase separate specialized policies, or add endorsements to cover
certain losses.
Tip: Small
businesses in certain categories, including retail businesses
and apartment house, office, or condominium residential
complexes can purchase a
Business Owners policy
.
This policy packages together coverage needed by most small
businesses and includes liability coverage.
Businesses
that need broader coverage or higher liability limits
may want to purchase a commercial umbrella liability policy
to supplement their existing basic liability coverage.
Business owners generally need
to own basic liability coverage
with certain limits before they can be issued a commercial umbrella
policy. If a claim is filed, the underlying policy first pays up to
the limits of the policy. Afterwards, the commercial umbrella policy
will pay up to the limits of that policy. The umbrella policy will
pay first, however, if it covers a loss excluded under the basic
policy.
Businesses that need protection from liability risks
excluded from commercial general
liability policies can purchase many types of specialized
policies and endorsements. These include pollution/environmental liability
insurance, employment practices insurance,
and manufacturers and contractors insurance,
among others. Although most CGL policies include product liability
coverage, this coverage
can also be purchased as a separate policy if excluded by
endorsement. For a list of things excluded under CGL policies, see Commercial General
Liability Insurance.
Professionals
can make errors in judgment or show lack of skill in their area of
expertise. This can lead to suits for bodily injury and property
damage.
Professionals
can be sued for bodily injury or personal injury if their
professional conduct is harmful to others.
It's possible
for professionals to be sued for personal injury if they breach a
professional confidence, such as revealing medical information or
the details of a client's will without consent.
Professionals
also face many of the same risks faced by business owners besides
the special risks posed by their own occupations. They may want to
purchase both professional liability
insurance and
a commercial general
liability policy
to fully protect against possible loss.
Because CGL
policies do not cover losses arising from professional acts or
duties, professionals must purchase a professional liability
insurance policy
to protect against liabilityclaims
and lawsuits. They can purchase several types of liability coverage,
including malpracticeinsurance,
Errors & Omissions (E&O) insurance,
and Directors and Officers Insurance,
a type of E&O insurance.
In general,
professional liability
insurance policies
are expensive, tailored to the needs of the professional group
covered, and are written on a claims-made, rather than an occurrence
basis.
Malpractice insurance protects
professionals against liability for
bodily injury resulting from their misconduct or lack of skill.
Individuals commonly insured against malpractice are those in the
medical field such as physicians, dentists, and pharmacists.
Errors & Omissions insurance protects
professionals against liability for
damage to tangible or intangible property resulting from
errors--something they did--or omissions--something they failed to
do. Those commonly insured against errors and omissions include
lawyers, accountants, real estate agents, financial planners,
bankers, stock brokers, engineers, architects, insurance
agents, employee benefit managers, and other
professionals who manage money and property for others.
Directors and officers insurance is
a type of E & O insurance policy
that protects directors and officers of corporations and tax-exempt
organizations if they are sued while performing their duties. They
may be named in a lawsuit when employees, shareholders, and others
sue the corporation or organization for damages resulting from
errors, omissions, discrimination, personal injury, etc.
