What Does General Liability Insurance Cover For Small Businesses

What Does General Liability Insurance Cover For Small Businesses
by Arthur Williamson,

General Liability insurance provides protection against anything the business can be liable for. Liability is the state of being responsible for something by law. In insurance terms, that translates to the business causing someone physical bodily injury, emotional, advertising, monetary, & property damages of any kind. 

Liability Protection For Small Businesses

General Liability Insurance oftentimes comes with several other layers of coverage, with the main focus being on liability itself. Liability coverage covers court fees, lawyers’ expenses, and payout to the other party that is suing you up to the coverage limit. Both General Liability insurance & Business Owners Policies (referred to as BOP's) provide basic liability protection for small businesses, but they do vary. 

Many consumers don't understand that these two policies are very different from one another. General Liability is provided for higher risk classes in comparison to BOP's. BOP's are designed for average small businesses, whereas General Liability is for larger operations with a broader need for coverage and higher risk exposure. BOP's offer reduced rates, and they bundle sets of coverage options together, which is where the lower rate applies. BOP's are not available to all business owners as they must meet certain risk criteria to be eligible for the BOP program. 

BOP Eligibility: Accountants, Financial Planner, Insurance Agency, etc. These businesses are classified as being low risk because they tend to have a lower number of people coming in and out of the office, with fewer employees & less exposure to claims. General Liability Insurance can be purchased by almost anyone. General Liability coverage tends to play into the higher risk codes such as construction or transportation. 

General Liability Eligibility: Manufacturing, Trucking, Roofing, Contracting, etc. These types of businesses tend to be run on a larger scale as far as employee count, employee work environment risks, consumer exposures, etc.

Majda Baltic is the Broker, CEO & Founder of Majdas Touch Insurance, Inc; A national Independent Insurance Brokerage. 

We talked to the experts, who explained all that is covered by general liability insurance for small businesses, including;

  • Property Damage
  • Malpractice Claims
  • Negligence
  • Legal Fees
  • Bodily Injury or Death

 Loss Caused By The Negligent Acts Of The Business

A commercial general liability policy (“CGL”) covers persons who are not employees of an insured and protects the business against loss caused by the negligent acts of the business.

The CGL pays loss to customers, vendors, and guests of the business who are injured due to a “covered loss exposure,” such as when an injury results from the ownership and maintenance of land and buildings; the actions of the owner and/or employees while on or away from the premises during the course of business; the use of products developed, manufactured or distributed by an insured (claims normally involve product liability, breach of warranty and/or strict liability); or the work of the insured that has already been performed.

CGL policies generally pay for bodily injury and property damage to third parties. It also provides coverage for “personal injury,” meaning an injury that is not “bodily” injury. In other words, it is an injury to a person’s psyche, mind, soul, or spirit that arises out of causes of action such as false arrest, malicious prosecution, wrongful entry or eviction, libel, slander, or invasion of another’s right to privacy. 

It also pays for “advertising injury,” which occurs when an insured advertises their goods or services and that advertising causes injury through copyright infringement, misappropriation of the advertising style or idea of another, slander or libel that defames persons unintentionally or inadvertently or oral or written publications that violate another party’s privacy rights. 

CGL policies also provide medical payments, sometimes known as “medpay,” which pays the medical expenses of a third party that is incurred within 12 months of an accident that causes bodily injury. This is sometimes referred to as “no-fault” or “goodwill” coverage. It is a payment to others who are injured (not the insured).

Mario Iveljic, a Founding Partner of Mag Mile Law, LLC.

Property Damage

General liability insurance is insurance that covers instances that occur in small businesses, especially for legal claims such as property damage, personal injury, and any form of negligence. General liability insurance should be obtained by all businesses so they can protect themselves from common lawsuits. 

They minimize the financial burden of these lawsuits. If a business has any space such as a warehouse, or an office, general liability insurance is necessary. In fact, some states require general liability insurance for certain industries. For instance, many states require general liability insurance for construction work. 

General liability insurance costs on average $42/month and some can be as low as $25. Other forms of insurance such as professional insurance (more commonly known as malpractice insurance) are very similar except it covers issues like breaches in contract or professional negligence. In many other businesses, this would be more appropriate.

Omer Reiner, a Licensed Realtor & President of FL Cash Home Buyers, LLC.

Bodily Injury

General Liability insurance policies cover the most common liability issues that will arise against a business. These are typically customer injuries, customer medical bills, customer property damage, and advertising injury. Business owners commonly need this insurance protection if they have a brick-and-mortar store that customers would be likely to frequent. 

Even law firms, such as mine, are often required by lessors to carry some amount of general liability insurance coverage.  

Alexander Knapp is the Managing Partner at Knapp Accident & Injury Law

Legal Claims 

Your small business needs General Liability Insurance to ensure that your company maintains its financial stability. In addition, it will help you cover up expenses if someone legally sues your business for damages done to them. It may be a bodily injury, damage to property, or any advertising and reputational harm.

For example, it can aid you to pay a customer's medical expenses who meets an accident while in your business firm and also helps you cover costs when your business damages a customer's property. And Lastly, it enables you to compensate for legal expenses when a competitor claims that your business caused defamation of their company's image.

Matthew Roberts, Chief Operating Officer at My Choice

Copyright Infringement, Reputational Harm, And Advertising Injury

General liability insurance covers injury costs if someone gets hurt at your business. For example, if someone slips and breaks their wrist, your insurance will pay for their hospital visit and treatment, including surgery if it’s necessary. 

General liability will also cover you from lawsuits for damaging property. For example, if you have a roofing company and one of your employees was torching a roof and inadvertently started the house’s attic on fire, and that fire spread to the whole house, your general liability policy would cover the loss from that damage. If the property damage were low-value, the business would be better off paying for the damage without filing an insurance claim, but for major damage, an insurance policy can help keep a small business in business. 

Those types of liability claims are similar to those that a private individual would carry with their homeowners insurance. The other coverages in a business general liability policy are specific to business needs. General liability insurance covers lawsuits for copyright infringement, reputational harm, and advertising injury. 

Copyright problems occur if you use material or practices that are owned by someone else or another business without permission or attribution.

A reputational injury might happen if you say something publicly about another business that damaged their reputation. 

Advertising injury is similar to reputational injury, but it applies to advertisements that injure another business or person. 

Cyber liability and data breach coverage pay for losses associated with hacked or stolen information from a computer. An additional addendum on your policy will cover damage done by a private contractor when they’re doing work for you. 

Melanie Musson is a Business Insurance Expert with USInsuranceAgents.com

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Assured Standard will protect your business with the right insurance, depending on your needs. Now more than ever, it’s crucial to have the right general liability insurance experts on your side. Protecting the future of your business starts today.
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