Liability insurance protects you in the event that your negligent actions cause injury or damage to others. It’s a two-party contract where the insurer and insured both agree on the limits of cover to be paid.
There are several different types of liability coverage that businesses can take out. The most common are:
General liability insurance, also called commercial general liability, offers protection against claims made for which your business might be found liable. It doesn’t typically cover professional service mistakes, damage to your business property or employee injuries and illnesses (those are covered by workers’ compensation).
Accidents happen – that’s why it’s important to have general liability coverage in place. Whether it’s a customer slipping and falling on your floor or a client’s house being damaged by an on-site mishap, without this type of coverage, you could be facing costly lawsuits.
Many insurance providers offer general liability as part of a bundle with other policies, such as business owners policy (BOP). You can also buy it as a standalone policy or as an endorsement to another type of business policy. It’s commonly written as a claims-made or occurrence policy, with the former offering coverage for incidents that occur during the policy period even if you didn’t report them at that time.
Employers’ liability insurance (also called workers’ compensation) protects businesses from financial loss caused by work-related injuries or illnesses. This coverage pays for legal costs and any settlements or judgments awarded against a business in the event of a claim. It is typically included in a workers’ comp policy or can be purchased separately.
For example, if an employee is in a scissor lift that falls and kills them, their workers’ comp should cover their medical bills and funeral expenses. But the company could still be sued for negligence by their family for loss of consortium. This is where employers’ liability insurance could come in handy.
While it is generally included in a workers’ comp policy, this type of insurance does not protect companies from claims related to criminal acts, illegal profit, fraud or purposeful violation of the law. Additionally, it does not cover losses related to downsizing, layoffs, workforce restructuring, plant closures, strikes or mergers.
A products liability policy protects your business against claims that a product you sell, manufacture or distribute has caused injury or property damage to a third party. It typically covers the cost of compensation and legal fees, as well as the costs of any property repairs. Depending on your industry and the nature of your products, it’s important to get specific about what this coverage includes and excludes.
It’s also worth noting that this policy responds to claims directly related to the products you sell, manufacture or distribute—not to general claims relating to your entire business operations (e.g., a customer slips and falls on your property). This is why many small businesses opt to add it to their commercial general liability policy as an additional extension of their coverage. For manufacturers, it can also include ‘products-completed-operations’ coverage, which protects your business in cases where a work-related injury or damage occurs to a third party.
Professional liability, or errors and omissions (E&O) insurance, protects consultants, advisers, and service providers like accountants, architects, engineers, lawyers, IT professionals, doctors, and others against claims for negligence, malpractice, mistakes, or misrepresentation. It’s often included in a bundle with other policies or sold separately, and it is frequently purchased by individuals working in law firms.
Professional liability insurance is typically a claims-made policy, meaning that it must be in force when a claim is filed and must cover events that took place during the policy period. However, some policies may provide a retroactive date in order to protect businesses from unforeseen incidents. Employees must submit the Professional Liability Insurance Reimbursement Form and all necessary documentation to their SHRO in a timely manner to ensure reimbursement of premiums. Employees must also notify their SHRO if they discontinue or cancel their coverage. This will ensure that biweekly payroll deductions stop, and that any unused premium is returned to the company. assurance rc