Fort Myers, Cape Coral, Naples, Port Charlotte, Sarasota, Tampa and Punta Gorda, Florida
WHY DO I NEED LIABILITY INSURANCE?
Good liability risk management can reduce the chances that your business will be sued, but it can never eliminate the risk entirely. You or a member of your organization can make a mistake that injures someone or damages property. Your mistake could harm the reputation or interfere with the privacy of a customer, client, competitor or member of the general public. When such injuries occur, you may be legally liable to pay damages to someone who suffers a loss due to your actions or inaction.
Depending on the degree of harm and the number of people injured and/or value of property damaged, a lawsuit could bankrupt your business. Even if your organization is ultimately cleared of any wrongdoing, a determined plaintiff can keep you tied up in legal proceedings for a long time, entailing significant cost to defend yourself. Liability insurance pays the cost of your defense and protects your assets.
WHAT KIND OF LIABILITY POLICY SHOULD I GET?
For small businesses the most efficient and least expensive way to purchase liability insurance is usually as part of the Businessowners Policy (BOP) which combines property and liability insurance in one contract. Alternatively, a business may purchase a Commercial General
ENDORSEMENTS TO BOP LIABILITY COVERAGE
Endorsements are additions to insurance contracts that change the coverage. Endorsements can add liability coverage for specific circumstances to the BOP. Among those most commonly added are:
· Employment Practices Liability
· Liquor Liability
· Employee Benefits Liability
Employment Practices Liability Endorsement – If your business has even a few employees, you cannot entirely avoid the risk of a lawsuit charging you with some type of employment discrimination, whether based on sex, race, age or any one of a number of other characteristics. This is typically one of those exposures—much like the exposure to theft by trusted insiders—that employers tend to think “won’t happen here.” Unfortunately, even if you have an excellent risk management program, an employment practices lawsuit can happen in any business. For example, you may fire a worker for poor job performance only to find he or she files a lawsuit charging that the real reason for the termination was race, religion, age or some other protected characteristic. Regardless of whether the employee can ultimately prove the charges, you may be tied up in a legal defense for a long time. Even if you think you’ve done nothing wrong, you could be found liable for discrimination and responsible for the payment of a large damage award. The Employment Practices Liability Endorsement provides coverage for violations of seven different federal antidiscrimination statutes named in the endorsement, as well as for violations of similar state and local statutes. You must choose a supplemental limit and deductible for this coverage that is separate from any of your policy's other limits. As part of the contract, you give the insurer the right to defend against any claim. The insurer may offer to settle a claim. If you do not consent to the settlement, the most the insurer will pay on the claim is the amount it offered in settlement.
Liquor Liability Endorsement – People who are intoxicated can harm others. If your business involves serving liquor for a charge, or if a license is required for you to serve liquor (even if you do not charge for it), your BOP liability coverage does not cover your liability exposure—the possibility that someone you served could cause a car accident, for example. The Liquor Liability Endorsement provides coverage for bodily injury or property damage for which an insured may be held liable by reason of any of the following:
Employee Benefits Liability Endorsement – If you have employee benefits programs, there is a risk you will be sued by employees or retirees charging there was negligent administration and management of the benefit plan. Even though you may use a professional benefits administrator, the personal assets of your in-house plan fiduciaries may be at risk if they are responsible for errors, omissions or breach of their fiduciary duties. The Employee Benefits Liability Endorsement covers this liability exposure.
Depending on the nature of your business and its risk exposures you may need one or more of the following types of liability coverages:
· Umbrella Liability Insurance
· Errors and Omissions Liability Coverage/Professional Liability Insurance
· Directors and Officers (D&O) Liability Insurance
Umbrella Liability Insurance – A big difference between property and liability risks is that you can put a value on the property you have at risk, but there is no way to predict the amount of damages you could be required to pay as the result of a catastrophic accident. If, for example, you were found liable in a school bus accident that injured children, the damages could be in the millions of dollars.
Umbrella Liability—also known as Excess Liability Insurance—provides extra protection for catastrophic events. The primary policies are called “underlying” policies and are specifically listed, along with their limits, on the umbrella policy. Typically, the underlying policies are your primary general liability, auto liability and the employer’s liability section of your workers comp policy. The umbrella coverage starts to pay when a covered loss exhausts the primary policy’s per occurrence limit.
Most umbrella policies exclude employment practices liability, professional liability, product recall coverage, workers compensation and coverage for asbestos-related claims, pollution, war and terrorism.
Errors and Omissions Liability Coverage/Professional Liability Insurance – If you provide any type of advice, expertise or professional service, you risk being sued by a customer, client or other party who claims he or she was injured due to your negligent act, error or omission. This type of negligence is sometimes referred to as “malpractice.” Professional Liability Insurance, also called Errors and Omissions Liability Insurance, pays the cost of your defense and any damages awarded, up to policy limits. Insurance companies have developed many specialized policy forms that respond to the individual risks characteristic of particular professions and services.
Directors and Officers Liability Insurance (D&O) – D&O Insurance protects past, present and future directors and officers of a for-profit or nonprofit corporation from damages arising out of alleged or actual wrongful acts committed in their capacity as directors and officers. Some policies extend the same coverage to employees. The policies provide protection in the event of any actual or alleged error, omission, misstatement, misleading statement or breach of duty.
Many policies will also cover the corporate entity for claims involving the sale or purchase of the company's securities. A D&O policy does not cover exposures properly covered under other policies, such as bodily injury or property damage, which are covered under general liability.
OTHER LIABILITY COVERAGE
In addition to the coverages above, the following liability coveragesa re available:
· Product Liability
· Pollution Liability
· General Liability
· Cyber Liability
· Garage Liability
HOW MUCH LIABILITY COVERAGE DO I NEED?
The amount of liability coverage a business needs depends on perceived risk. You should first consider the amount of risk inherently associated with your business. For example, a business that manufactures or distributes power tools is at a greater risk of being sued than one that distributes towels and would therefore need more liability insurance. You can usually get a good sense of lawsuits involving your type of business through your trade association. Ask your agent for help assessing your liability risk.
WHAT IS "CLAIMS MADE" COVERAGE?
There are two major forms of liability insurance policies: Occurrence and Claims Made.
Occurrence Policy: An occurrence policy covers a business for harm to others caused by incidents that occurred while a policy is in force, no matter when the claim is filed. For example, a person might sue a business in 2010 for an injury stemming from a fall in 1999. The policy that was in place when the incident occurred (i.e.1999) will apply, even if the company now has a policy in place with higher limits.
Claims Made Policy: A claims made policy covers the business based on the policy that is in force when the claim is made, regardless of when the incident occurred. In the above example, the limits in the policy in effect in 2010 would apply.
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