Are you worried that legal liability could cause significant financial problems for your business? Then, familiarize yourself with common business legal liabilities to cover your bases. Therefore, you’ll know what to look for in a business insurance package when shopping for the best provider.
We will share a list of the most common types of legal liabilities businesses have to deal with. However, this is just a fraction of the business liabilities companies are exposed to, so make sure to research your industry to find ones not on this list.
General Liability
General liability falls under business operations-related claims, which is vague so it includes various instances. However, businesses that deal directly with customers should get general liability insurance.
For example, if you own a retail store and a customer slips on a wet surface, they might claim damages for medical bills. This means your business would be liable for the bill, so it’s important to have general liability insurance.
General liability insurance typically covers claims of bodily injury and third-party property damage. Without insurance, you could face large legal bills that could cripple your business financially.
Product Liability
Product liability refers to cases where customers file claims because of personal injury due to a product. For example, if a faulty ladder you sold caused the customer to fall and break a leg. Therefore, product liability insurance protects businesses from the legal fees associated with products that can potentially be a hazard.
In the scenario above, it’s not practical for businesses to check that every ladder they ship is manufactured correctly – it would be too costly. Businesses generally trust that they have chosen a reputable manufacturer or supplier that will deliver faulty-free products. However, in the event that there is a faulty product, insurance protects unforeseen large legal fees.
Note that product liability can be obtained separately from an insurance company, but it can also be bundled up with public liability insurance.
Employers’ Liability Insurance
Employers’ liability insurance is a legal requirement for businesses that employ people. It’s required to provide coverage for employees’ personal injury, sickness and other related cases. Most employers’ liability insurance covers part-time and temporary workers too.
An example of when a business can take advantage of employers’ liability insurance includes construction site work. If an employee falls off scaffolding and claims it was not set up correctly, you can use liability insurance to pay for legal fees. This would protect the business from large payouts, even if the scaffolding was set up incorrectly.
Professional Indemnity Liability
Businesses that offer professional services where advice is given need to obtain professional indemnity liability insurance. This protects the business from lawsuits where customers claim to suffer damages from the professional service.
The type of professions that should consider getting professional indemnity liability insurance includes:
- Surveyor
- Lawyer
- Designer
- Architect
- Photographer
- Wedding planner
- Accountant
- Healthcare professional
- Consultant
Commercial Vehicle Liability
Does your business rent or own company vehicles? If yes, then commercial vehicle insurance is important to ensure that vehicle damage is covered. Also, companies that have more than one vehicle can apply for fleet insurance, which generally provides a better deal.
The vehicles that can be included in commercial liability insurance include cars, lorries, vans, motorbikes, and more. Furthermore, you might be offered add-ons to the insurance package, which include the tools you need to operate those vehicles.
The covered types of damages should be carefully examined in the insurance agreement. Ideally, all damage types and theft should be included to avoid paying out of pocket.
Commercial Property Liability
Commercial property insurance is required for businesses that own real estate. The insurance coverage should protect against various types of damage that might occur because of natural causes and employee/customer damage. Also, note the maximum coverage the insurance covers, which is especially important for expensive property types.
Is your property sitting on land prone to floods, forest fires, hurricanes, or other damage types? Then the commercial property insurance should cover these damages. However, insurance companies might increase the premiums for this damage type.
Commercial property liability insurance also covers theft. However, you’ll need to name the specific assets you want covered. Otherwise, you might get rejected during the insurance claims process.
Cybersecurity Liability
Cybersecurity is becoming an increasingly bigger problem for businesses as the dependency on digital systems increases. Therefore, it’s important for companies to invest in strong security against cyber threats. You can hire a cybersecurity professional to help improve the process.
The type of cybersecurity threats you have to be concerned about include:
- Data branches
- Virus
- Trusted insider threats
- Zero-day attacks
- Ransomware
- Malware
- Business email compromise
The type of companies that need cybersecurity liability includes any business that interfaces with the internet. However, companies that store customer personal information have an added responsibility to invest in security measures.
Business Interruption
Many businesses must continually operate to pay for rental costs, employee wages and much more. Therefore, when a business cannot operate because of a natural disaster or other reasons, it can lead to massive losses that could force bankruptcy.
Therefore, getting business interruption insurance provides the peace of mind that income will continue to flow. However, the size of the insurance package should ideally cover the full amount of revenue lost.
Final Thoughts
Some of the largest insurance companies in the world include Chubb Ltd, Travelers Company Inc, and Liberty Mutual. However, you need to consider the liabilities mentioned above to find the right insurance package deal. Ideally, your business insurance company will offer an all-in-one deal that allows you to save money.
Finally, understanding the nuances of the common types of business legal liabilities can be confusing. Therefore, don’t hesitate to hire a business lawyer that can help cover your bases.
