In today’s litigious marketplace, even the smallest mishap in the workplace can be the beginning of an expensive lawsuit. It makes good business sense for companies to carry General Liability Insurance (GL) to guard against potential losses from lawsuits initiated by non-employees.
GL can be purchased as a separate policy, or it can be part of an insurance package, commonly called a BOP, or “Business Owner Package”. This insurance protects the assets of a company when they find themselves in the middle of a lawsuit from either acts of negligence, omission or errors as defined by the law. These various acts open a company up to a property or personal injury suit from a third party.
General Liability Insurance covers many of the same types of injuries or damages covered by workers’ compensation, but for third parties. Workers’ compensation is just what it sounds like: insurance for employees harmed on the job. GL covers people who suffer damage from something other than their employment.
The additional coverage offered by General Liability Insurance can protect owners and the administrative staff of businesses from a wide range of potential lawsuits. Accidents during the manufacture, or even the use of a product, contractual liability due to previously determined potential liability distribution, or even when an act of negligence from or damage to a third party can open up a business to a lawsuit. There are many other ways for individuals or companies to bring suit against your company. Depending on the type of business engaged in, these claims can be expensive for a company to cover from their own assets. GL can shield your company, helping it stay afloat in the event of a lawsuit.
A BOP combines property and liability insurance into one convenient package for a policy holder. The amount of coverage needed will depend greatly on several different factors. When you are weighing what type of policy to purchase, you should consider the following factors:
- What is the potential for a lawsuit against your company? What type of business do you run, and what is considered reasonable and prudent for you to do to protect all third parties? Remember, a manufacturing company has higher risks associated with their workplace than a company repackaging imports. What risk is involved with your company? That helps determine what risk is involved for your company as well.
- What state do you operate in? Businesses operating in states known to award high damage amounts need to carry more liability insurance than companies operating in states with typically lower damage awards in court. A knowledgeable insurance broker can help you determine what is typically awarded for damages in the state where your company is located. You need to know how much insurance coverage to carry.
- How much exposure can your company carry on its own? How much does it want to carry? Do you believe you can handle any amounts awarded in excess of the coverage you have chosen to carry?
IMPORTANT THINGS TO KNOW ABOUT GENERAL LIABILITY INSURANCE
General liability insurance pays the legal costs and awards of a covered lawsuit or claim. It also covers general damages and compensatory claims. Typical uses of this insurance (although this is not the entire list of appropriate uses) are for bodily injury, personal injury, property damage, or even slander and/or false advertising. Coverage is broad under a GLI, but does not cover punitive damages, because punitive damages are considered punishment for deliberate acts or torts.
Each GL policy has a maximum amount of coverage. If this maximum amount is exceeded due to a court ruling, the company must pay the difference. For example, a company has a policy in place for one and a half million dollars ($1,500,000). The company is sued for two million and the plaintiff wins The company must pay the difference between the amount of insurance and the court award. In this example, that would be $500,000 out of pocket. Again, an experienced insurance broker will help you determine the coverage best for your state and type of business.
For companies desiring to minimize their risk, an umbrella liability policy can cover the gap in coverage. These policies are not included in standard liability insurance policies and must be purchased separately. There are additional coverages possible not provided in the basic policies of GL or workers’ comp. Be sure and ask your broker what coverage is included with your standard policy, and what an umbrella policy can do to protect your assets.
In order to keep costs low and benefits high, most companies require documentation as soon as possible about any injury that could lead to a potential lawsuit. This includes documents such as legal notices, forms showing time and type of injury, and preventative measures taken. Policy holders are expected to fully cooperate with any investigations and keep the insurance company informed of any correspondence or information that might be pertinent to the suit.
Preventative tasks can influence premiums. Companies showing: company records and documents up-to-date; employees both adequately trained and supervised; procedures in place for documentation; and high product and workplace quality control, can possibly lower their insurance premiums. Be sure to ask your insurance company for safety tips tailored to your type of business. Anything you can do to lower your risk will also help lower premiums overall.
Taking precautions now will help prevent injuries, and that translates to lower premiums in the future. Be pro-active to help control your insurance costs, while making sure the necessary insurance is in place to protect your hard-earned assets.
SPECIAL CONSIDERATIONS FOR CONTRACTORS AND THOSE IN THE CONSTRUCTION INDUSTRY
One of the many tasks expected of a general contractor is to make sure all people working on a job are covered by an insurance policy. They should be covered by a general liability insurance policy. This greatly reduces the risk for the general contractor, and thus his own premiums will be reduced. Although the subcontractor is not considered an employee, if someone is injured, an attorney will find a way to charge any and everyone on the project with negligence.
For example, someone gets injured on the job, but because they are not your employee, workman’s compensation does not apply. The injured person’s lawyer will typically name anyone and everyone involved on the project. If there is not an insurance policy in force, the injured person’s lawyer will go after many individuals in hopes of a successful lawsuit from one or more of them. Anyone working on the project is at risk of a lawsuit. A subcontractor may indicate they believed they were an employee and should be covered by your policy.
If a third party is injured, the injured party may sue the contractor, any subcontractors, and even the individuals involved. It is critical to have general liability insurance in place.
Premiums are determined by many different factors. Gross receipts, payroll expenses and the type of work performed are all factored into the equation. The type of coverage required also is a major factor. The purchase of GL is similar to purchasing other kinds of insurance. You make a down payment and then have regular payments. Expenses are regular and the amount can be counted on for your company. This prevents your company from having to come up with a large sum as a payout for injuries sustained. GL makes sense in today’s litigious society! Don’t be without the protection a good GL policy can provide to your business!
