On Stable Ground: Does Your Business Need General Liability Insurance?

Most business owners know that some forms of insurance coverage are required by law. Most businesses with employees are required to carry workers’ compensation insurance policies, for example, and just about every state places a minimum requirement on what kind of commercial auto insurance businesses are required to have. While general liability insurance is not typically required by state law, taking out a policy is still a good idea for most businesses.

When is it Required?

There are some circumstances where general liability insurance is required to fulfill contractual obligations or lease requirements. Commercial property owners often require tenants who rent offices or workspaces to obtain a policy before finalizing their leases. It’s also not uncommon for professional licensing organizations to require general liability insurance coverage as a stipulation for providing licenses to practice dentistry, accounting, or real estate.

Companies that own their commercial properties may also need general liability insurance under some circumstances. A lot of general contractors, engineers, and other specialists will not work on a commercial property unless the owner has general liability insurance.

Business owners facing any of these situations can get started with the application process by contacting EINSURANCE. Others who may still be on the fence can read on to find out more about business insurance.

What’s Covered?

General liability insurance covers business owners if a third party decides to file a personal injury claim, a property damage claim, an advertising injury, or a reputational harm claim. Without an adequate insurance policy, the company will have to pay all costs pertaining to the settlement of these claims. If the business does not have sufficient assets to cover the cost of litigation, business owners can be held personally responsible for covering those costs. If you want to learn more about this, reach out to a Domingo Garcia product liability lawyer who can assist you.

Personal Injury Claims

The best-known of these issues is the common slip and fall. The average cost to a business owner who does not have general liability insurance of covering damages from a slip and fall is $20,000. For many small business owners, that kind of loss can be devastating.

The cost of settling any kind of personal injury claim can be exorbitant. Business owners will need to pay not just settlements, but also legal and court fees, often leading them to spend thousands of dollars even if they do not have to pay out on the claim. At the very least, business owners will need to hire a lawyer who will likely charge between $100 and $200 per hour.

General liability insurance also covers product defects. Whether the defect occurred due to a design flaw or a manufacturing issue, a customer injured by that product could file a suit against its producer. Products that are dangerous only when used incorrectly can also incur product liability lawsuits if their manufacturers do not include sufficient warnings and instructions on how to use the product properly.

Property Damage Claims

General liability insurance also covers business owners if a third-party files a property damage claim against the business. It will cover all administrative costs, attorney fees, and court costs as well as settlements and judgments.

If businesses rent their spaces, general liability insurance will also cover damage to the property itself if the damage is caused by a covered issue. Most policies cover everything from fire to explosions, lightning strikes, and some natural disasters. It is, however, worth noting that if a business owns the property, its general liability insurance will not cover damage from natural disasters and other causes.

Advertising Injury Claims

The most common kind of advertising injury claim is copyright infringement in advertisements. If, for example, a company’s marketing team uses a clip from a licensed movie, TV show, or song without obtaining consent from its creator, the artist or the artist’s label could sue for damages. A general liability claim will cover the costs of going to court.

Reputational Harm

Not all third-party lawsuits and insurance claims are filed by individuals. Other businesses can also file claims if they believe their reputations have been harmed by either a business owner or his or her employees. Avoiding reputational harm claims isn’t as easy as it might seem, as slander and libel are only the most obvious forms of reputational harm.

Take, for example, a business owner who is asked by a journalist to give an honest review of a competitor’s product. If the business owner offers an honest opinion and even explains why he or she believes the product is inferior, the competing business may be able to file a claim for reputational harm. Even if they don’t receive a settlement, the money required to pay a lawyer, pay court fees, and take time off to deal with the lawsuit can put a huge dent in a business’s bottom line.

Who Should Have General Liability Insurance?

Still not convinced that all business owners should have general liability insurance? Here’s a short list of what types of businesses can benefit the most from taking out this kind of policy.

• Any store, restaurant, or office that is open to the public or schedules meetings with clients or vendors on the property.
• Anyone who works on or near their clients’ properties.
• Any business that takes out ads or performs online marketing.
• Any company that maintains a social media presence.
• Any business owner who uses third-party locations to conduct business activities.

The Cost

The cost of taking out a general insurance policy will depend on multiple factors, so there is no way to offer an accurate estimate that would apply to more than one business. Factors that influence cost include industry, years in business, location, size, condition of the business’s building, and its insurance claims history.

The Bottom Line

General liability insurance covers a variety of situations. Running a business is already stressful enough without having to worry about what will happen if a disgruntled customer, client, or competitor decides to file a claim. It’s worth the cost of taking out a general liability insurance policy both as a safeguard against substantial financial loss and as a means of preserving business owners’ peace of mind.