What Companies Need to Know About Business Liability Insurance

The odds of facing a lawsuit in the U.S. are high; state courts handle over 100 million cases yearly. Many are civil cases involving business, worker, and consumer disputes.

As a business owner, the last thing you want is to get entangled in such legal matters. However, accidents can still happen regardless of how careful you are. Thus, you must prepare for the worst, and one of the steps to do so is buying business liability insurance.

If you’re unsure what this type of business insurance is for, don’t worry. This guide explains what it covers, excludes, and why you need it, so read on.

Protection Against Bodily Injury Claims

Liability insurance protects your business against bodily injury claims. Such claims can arise from any injury-causing event on your business premises.

Suppose a client falls while going down your office’s stairs. They then blame your stairs, saying the steps or railings are defective. If they can prove your stairs are problematic, you’ll be liable for their injuries.

Another is if a client gets injured after slipping on a patch of damp floor on your business premises. They may demand you pay for their health and medical costs because there was no warning about the wet floor.

In both cases, you must pay the health and medical costs they incur due to the incident. That’s because your business premises caused their injuries. However, as long as you have liability insurance, it should help cover these costs.

Coverage for Property Damage

Business liability insurance also protects your firm against third-party property damage. These can result from instances wherein your business damages another party’s property.

Let’s say your firm provides professional cleaning services to clients. During a booking, one of your workers accidentally spills bleach on a client’s rug, causing it to fade. The client may then demand you pay to repair or replace their damaged property.

Here’s another example: Suppose your business offers gardening services. During an appointment, one of your employees damages a client’s sprinkler. This resulted in the client needing to replace the destroyed component.

As long as you have liability insurance coverage, it should kick in to help pay for the costs the client demands.

Covers What Workers’ Comp Doesn’t

Most states require employers to purchase workers’ compensation (AKA workers’ comp) coverage. Some even mandate this business insurance for firms with only one employee. The only state where this isn’t always mandatory is Texas.

Worker’s comp covers medical and health costs of employees who get sick or injured in the line of work. These include previous and ongoing care costs, lost wages, and disability benefits. It also pays out death benefits to the beneficiaries of a worker who dies due to a job-related injury or illness.

So what makes workers comp vs employer liability different, then? One is that the former doesn’t cover the employer’s legal costs if a worker sues them. Employees may file a lawsuit if their injury or illness is due to their employer’s negligence.

An example is if an employer disregards multiple notices about fixing equipment defects. As a result, the machine malfunctions and injures workers.

In that case, the injured workers can sue the employer for negligence. The employer can be liable because they neglected the necessary repairs.

An employer’s liability coverage pays for the legal costs related to such events. This is why you, as a business owner, should have this alongside worker’s compensation. A good enough reason is that over 2 million nonfatal job injuries and illnesses occur in the U.S. yearly.

It’s not just your employees who may file a lawsuit against you; your customers can also do so. For instance, clients may sue you for injuries or illnesses they sustain on your premises. They may also do the same if they believe you breached your contract with them.

Another situation wherein a client may sue you is for false or misleading adverts. If the court finds you guilty of this accusation, it may require you to pay damages to the party that sued you. You may even have to pay for their legal costs.

A competitor may also sue you for defamation (libel or slander). This can happen if you write or say something that can tarnish their reputation. If they win the case, you may have to pay them thousands, even hundreds of thousands, in damages.

Fortunately, business liability insurance can help cover those expenses. It also pays for the costs you incur to defend your business, such as your lawyer’s fees.

It Doesn’t Cover Everything

As comprehensive as business liability insurance is, it doesn’t cover all risks.

Aside from worker injury and illness, it excludes damages to your business’s property. Another exclusion is an auto accident you or your employees cause while on the job. Neither does it cover discrimination against workers.

Fortunately, specific types of business insurance exist to protect you from such incidents.

For example, commercial property insurance covers your business’s property. It helps pay to fix or replace commercial property you lose due to theft, vandalism, or fire.

You also need commercial auto insurance if you or your workers use company vehicles. You should never go without this coverage, as 13 crashes occur every minute in the United States. This is also why it’s mandatory in most states; they won’t even let you register a vehicle without it.

Employment practices liability insurance (EPLI) covers non-negligent-related employee lawsuits. These include discrimination, sexual harassment, and wrongful termination, to name some.

Buy Business Liability Insurance Today

Here’s one last stat to remember: the cost of litigation for small businesses can range from $3,000 to $150,000.

So if your firm doesn’t have business liability insurance and gets sued, it could lose a lot of money. Its financial losses may even be so severe you might have to close it down for good. That should be enough reason to buy this policy ASAP.

Did you like this article? If so, you’d surely enjoy our other guides, so check out our site’s Business section for more tips and tricks!