All business owners eventually ask this question. For new businesses or those unfamiliar with general liability insurance, this brief explanation should prove informative. For seasoned managers, use it to review your operations and ensure all facets are protected.
Business operations and products vary widely. A restaurant has different risks than an accountant. Thus, general liability protection will apply differently to each. Coverages include:
- Bodily Injury
- Property Damage
- Products and Completed Operations
- Damage to Premises Rented To You
- Personal and Advertising Injury
- Medical Payments
Coverage Summary and Examples
The bodily injury portion of the general liability policy responds if your business is liable for hurting someone. For example, if you are a lumberyard and one of your employees harms a patron while helping load a vehicle. Or if you are a restaurant and a patron cracks a crown on a bone fragment in a hamburger. Consider your operations onsite and offsite when evaluating this risk.
Property damage provides protection should you break something during your business operations. If you operate a janitorial service and an employee fails to latch the client’s door when they leave, allowing it to swing open, this portion of the policy responds should pipes freeze and cause water damage.
Products and Completed Operations: All businesses have liability associated with some sort of a product or completed operation (service). Should that product or service hurt someone or damage something, this portion of the policy is where that protection is found. It is not limited to your location and follows your products wherever they might end up.
Damage to Premises Rented to You: If your business temporarily rent premises and damage them, you may be found liable for repairs. This coverage is usually limited to $100,000, but can be increased if needed. Longer-term leases on the other hand will specify which party, whether the lessor or lessee, is responsible for insuring the building. If your business is responsible to insure a leased building, it should be added to a property policy. Such exposure is not intended to be covered by general liability insurance.
Personal injury guards against a variety of risks, including damages from oral or written publications, use of another’s advertising idea, infringement, wrongful eviction, and malicious prosecution.
Medical payments are no-fault protection. If a third party is hurt and seeks compensation from you, this protection is available no matter who is at fault. We recently saw many claims for this protection with the bomb cyclone snowstorm. Many people fell parking lots owned by our clients and injured themselves. Since this is a no-fault protection, it is available regardless of whether the business owner acted prudently to prevent the injury.
What Is Not Covered
Exclusions define the scope of the protection. The primary exclusions are listed below, and most should come as no surprise:
- Contractual liability: Liability you have due to a contract with someone else
- Liability related to autos, aircraft, or watercraft: Separate policies exist for those.
- Injury to your employees: Those are properly covered under workers’ compensation.
- Damage to your own product or work: Contractors, listen up! If you are a plumber and install faulting water supply lines that break, the resulting damage to the building is covered but the insurance company will not pay to repair or replace the faulty plumbing. The same goes for the “product” of any other business operations. The idea is that insurance should protect your business, but not reward faulty product or workmanship. This is especially important to understand for general contractors where the entire project is their “product”.
- Recall of a product
- Pollution
- Expected, intended, or known injury or violations
This post is a summary of coverage only and provided as a broad explanation of coverage as it might apply to various operations. Be sure to speak to your insurance agent or reference your insurance policy for details, additional coverages, and exclusions.
Further Resources
- Contact Us with questions! This post is a summary of coverage only.
- General Liability Insurance web page
- General Liability Risk Insights
Was this article helpful?
- Share it using the links below
- Forward it to a friend or colleague
- Browse our other business insurance posts
- Join our mailing list
Comments are closed.