Why You Need Commercial Liability Insurance

October 26, 2010 No Comments »


Congratulations on deciding to open your own business. You certainly have a lot to think about and many new “hats” to wear. You may now be the accountant, interior decorator, tech guy or girl, and, oh yeah…the janitor.

But one of the most important things you are about to become is the risk analyst for your organization.

You may not have put much thought into that piece of the puzzle yet, but is highly recommended you do…or at least contact your local independent commercial insurance agent for some guidance.

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Whether you operate out of a 10,000 square foot warehouse or your home’s basement, you will need to get a commercial liability, also known as a commercial general liability (CGL), insurance policy to cover you against a host of potential liability lawsuits arising out of your negligence.

What You Need to be Insured Against

The scope of this article is not large enough to discuss the millions of possible situations for which you may be sued, but here are the basics, detailed by the coverage parts of the CGL:

Bodily Injury and Property Damage: Premises and Operations Portion of the CGL (Coverage Part A)

As discussed above, you may sued for a variety of bodily injury or property damage claims that arise out of your negligence. For example, a customer may slip and fall in your convenience store and sue you for bodily injury damages because your floor was left wet after you mopped up a Slurpee spill.

This coverage also extends to your employees. Perhaps an employee of yours injures someone while trying to replace a light bulb by dropping it on their head from a ladder. Commercial general liability would cover you in this instance (up to your policy limits). Please note; this policy does not provide coverage for any injury your employee may suffer as this would be covered by workers compensation insurance.

Bodily Injury and Property Damage: Products and Completed Operations (Coverage Part A)

Perhaps you are in the manufacturing business. Even though your products have left your building or your work is completed, you still have liability for your work. Basically, you are not off the hook the second the job is done or your product is delivered to the end user.

For example, if your company manufactured faulty staircase hand railings that failed to hold the bodyweight of an individual who purchased them, your company would be held liable for the bodily injury and any property damage that occurred as a result of the individual’s fall. This would also be covered by Part A of your CGl policy.

Personal and Advertising Injury: (Coverage Part B)

We are now looking at “financial” injury, rather than “bodily” or “property” damage. Perhaps you develop an advertising campaign that you believe to be unique, but “borrows” a tag line from an existing competitor. For example, your financial planning business advertises your clients are, “in good hands” when choosing to purchase your services.

You can expect to get a call from Allstate’s legal team regarding your choice of words, as you have unknowingly used their well known catch phrase. Coverage B of your CGL policy would cover you against any damages awarded to Allstate in a legal battle if you were found to be liable for infringement.

“Personal Injury,” such as false arrest or detention of someone whom you believe was trying to steal from your organization would also be covered under this portion of the CGL policy.

Medical Payments Coverage: (Coverage Part C)

An individual may suffer minor bodily injury while on your business premises. Part C of the CGL policy would cover you against these minor injuries that do not result in a lawsuit. Your insurer agrees to indemnify the injured individual with this type of “no-fault” coverage.

Basically, in order to avoid a costly lawsuit, the insurer will shell out a predetermined amount of cash for minor bodily injury, usually between $500 and $10,000, depending on how much coverage you purchased.

Read more: Why you need commercial vehicle insurance.

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