General liability insurance is one of the most important policies that a small business can have. This will likely be the first policy that an independent insurance agent recommends for purchase. It protects against two key risks: bodily injury and property damage to third parties. A third party is someone other than you or your employees. Not only will the policy provide financial assistance for the medical bills or repair costs, but also legal defense costs. In certain incidents, the third party may want to file a lawsuit against you. Suddenly, you are on the hook for a lawyer’s fees, court fees, and any other damages related to the lawsuit.
General liability differs from professional liability insurance. Both are important forms of coverage for small businesses, but professional liability protects you as a professional. This means that if you provide advice or a specific service to customers or clients, they will have certain expectations. If they believe that you have been negligent or have failed to provide them with the best service, then they would have cause to sue. This article focuses on general liability issues rather than professional liability lawsuits.
Without general liability insurance, a single lawsuit could cost you thousands of dollars, and possibly put you out of business. Thankfully, having the right coverage can protect your business against such an event. Below are several examples of the most common small business lawsuits. General liability insurance protects against specific incidents, and each of the examples below provides insight into how you would be protected.
Example 1: Property Damage Lawsuit
Customers or clients can file a lawsuit against your small business if they believe your negligence caused damage to their property. Keep in mind that property damage protection under a general liability policy is only for a third party’s property, not your own. For example, you own a landscaping company. One of your employees drives a truck used for hauling away dead vegetation onto the client’s property. They start to take the truck onto the lawn, ignoring the fact that there was a heavy rainfall yesterday. The truck gets stuck in the mud. As the driver attempts to free the truck, the wheels spin mud and debris everywhere, including through the windows of the client’s home. Several windows are broken, and there is now mud clumped on their living room carpet. The client can sue your company for property damages to the windows and flooring. In total, they are suing for $10,000 to replace everything. General liability insurance would protect your landscaping company from having to pay the legal costs out of pocket.
Example 2: Bodily Injury Lawsuit
As a small business owner, there are certain laws and regulations you are obliged to follow in order to provide a safe environment for your customers. If a client were to injure themselves on your property, they could sue you for negligence. General liability insurance only covers injury to third parties, like customers or other individuals who have set foot on your property. (For protection against employee injuries, consider purchasing worker’s compensation insurance.)
For example, you run a day spa that offers clients a wide variety of services, including hair styling, massages, makeovers, waxing, and laser treatments. On one occasion, a customer requested a laser hair-removal treatment. You bring them back to the room that has the proper equipment and tell them to have a seat. As the customer makes their way across the room to sit down, they trip over the cord for the hair-removal machine. Their fall results in several broken bones. In their lawsuit, they request reimbursement for their medical bills, their pain and suffering, and lost wages from having to miss several weeks at their job. Thankfully, a general liability policy will help to pay for each of these costs.
Example 3: Personal Injury Lawsuit
Unlike property damage and bodily injury, the personal and advertising injury component of a general liability policy can be much more confusing. Sometimes it’s hard to understand what it covers, but it actually protects against a wide variety of incidents related to slander, libel, malice, detention, invasion of privacy, and copyright infringement to a third party. Small business owners need to be quite cautious with how they interact with customers and other businesses, and having a general liability policy with this type of protection is essential.
For example, you are a hotel owner. One particular guest has stayed at your establishment for four nights. They have been rowdy, and there have been complaints from other guests about the noise level. You assume that their past behavior makes it likely that they will try to leave without paying. So, on the day of their checkout, you have your security staff prevent them from leaving through the front door. You try to hold them in the hotel until they agree to pay for the four-night stay. The hotel guest can file a lawsuit against your hotel company for keeping them against their will. As part of the personal injury component of your general liability insurance, you will be protected against having to pay for all of your legal fees out of pocket.
Example 4: Advertising Injury Lawsuit
The second aspect of the personal and advertising injury coverage is protection against anything that you say or do that harms or infringes upon the rights of another business. This can include using another company’s slogan or symbol for your own business, making false claims against another company, exposing private information, and much more.
For example, you run a nail salon. You have several competitors in the area and are worried about losing potential clients to the other salons. So, you decide to run an advertisement in the Sunday paper. In the ad, you mention two of the other nail salons. You claim that your company’s services are superior because, unlike the competitors, your salon is clean, inviting, and creates stylish nail designs. Your competitors could file a lawsuit for libel, which means that they claim your ad damages their reputation. The personal and advertising injury protection within your general liability insurance will help to cover the legal costs.
Speak to an Agent
Set up an appointment, or speak on the phone with an independent insurance agent who specializes in protecting small businesses. They will have the knowledge and experience to explain the benefits of having commercial general liability protection. They will also be able to answer any questions you may have and recommend additional insurance policies, like professional liability, product liability, business owner’s policy, commercial property insurance, and much more.
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