Do you own or operate a business? If you answered yes, then you need Commercial General Liability insurance. Want to know what it’s all about? The article below will explain what it is and why you need it and hopefully not put you into a trance, but there are no guarantees; this is insurance, after all.
What is Commercial General Liability Insurance?
This insurance is designed to protect you from being sued for any injury or property damage to a customer or member of the general public that happens because of your business operations or something that happens on your business property.
Simply put, it is a risk management tool that protects you from financial loss if someone is injured or property is damaged due to your business operations. In addition to covering the cost of repairing what was damaged, it can even cover legal fees if someone sues you (as long as nothing was intentionally harmful).
While reading this article, please remember that this is an overview, and insurance policies have various limitations, exclusions, and clauses that may impact your coverage. Always seek the advice of a licensed insurance professional.
What Types Of Commercial Liability Are There?
There are two main types of commercial liability policy;
OCCURRENCE BASED POLICY
This is the one we recommend for the best coverage. This policy sticks with you forever, increasing your protection if someone returns much later, claiming damages.
For example, if there was an incident in 2021, but no legal action was taken, and suddenly the customer decides to sue you, your 2021 policy will cover that instance, even if it’s a year or two later.
CLAIMS MADE POLICY
This is your next best bet if you cannot qualify for the first option. The coverage here is the same, but with a big BUT attached. To be covered, you are required to have an active policy in place. When you cancel your policy, all of your coverage goes away.
For example, if you cancelled your policy on January 15th, but a customer came forward claiming damages on January 17th and sued, you wouldn’t be covered. There is a caveat here if you purchased a tail policy, but we will cover that later.
What Does a Commercial Liability Policy Cover?
As mentioned above, a Commercial Liability Policy covers many things, including:
- Bodily Injury – This covers your customers, clients, and others for injuries resulting from what you do, what you make, or where you do it.
- Property Damage – If you accidentally break or damage someone else’s stuff while doing your work, it will pay the cost to repair or replace what you broke or damaged.
- Products & Completed Operations – If you make, sell, or distribute it, this will protect you if something ends up going wrong and causes injury to someone or damages their property. You will be covered if you manufacture something that spontaneously catches on fire while it’s being driven.
- Personal & Advertising Injury – Remember the saying, “If you can’t say anything nice, don’t say anything at all”? This is true regarding your business, even if you didn’t mean it. This covers you in the event you are sued for slander. It can even cover you for copyright infringement if you overlook the legalities of using your favourite slogan, or song to promote your business.
- Medical Payments – This coverage can come into play so that you can offer to pay for the ambulance voluntarily if someone is injured at or because of your business.
- Tenants Legal Liability – This covers loss or damage from your negligence to a space or area you occupy as a tenant. It does not cover the entire building, just your portion of it.
All of the above examples are under the assumption that whatever the incident was, it wasn’t intentional. Intentional acts are typically not covered by your policy.
Am I Required to Get Commercial General Liability Insurance?
Sometimes, you don’t have a choice about getting Commercial General Liability insurance.
Are you renting an office, store, or shop? There’s a high chance your landlord will want to see proof of your liability insurance before you get the keys. Are you bidding on a big contract or job? Check the contract requirements; there is likely an insurance requirement in there. There are many instances where someone or something else you are hoping to do business with will require you to get Commercial General Liability insurance.
What is an Additional Insured?
Those who insist on the requirement of insurance for collaboration typically share a common practice: the desire to be designated as an Additional Insured on your policy. But what does it mean to be an Additional Insured? This status is conferred to individuals to shield them from potential liability arising from your business activities or products.
An example could be if you’re a subcontracting plumber and an unforeseen leak damages the property owner’s home; the contracting party is safeguarded from liabilities related to your work. Similarly, as a store owner leasing a space, if a customer encounters an accident within your premises, your landlord is protected under your insurance coverage.
Additionally, those designated as Additional Insureds often request a 30-day policy cancellation notice to stay informed if you decide to terminate your coverage for any reason.
Whether you are a landlord leasing a property or a contractor hiring a subcontractor, it’s crucial to ensure that your tenant or subcontractor possesses adequate insurance coverage and includes you as an Additional Insured on their policy.
What Other Types of Business Liability Coverage Are Available?
There’s more! In addition to Commercial Liability insurance, many other types of business liability coverage are available. Among them are:
- Excess Liability – Provides higher limits over and above your Commercial General Liability coverage.
- Umbrella Liability – This is similar to excess liability except that it can be over and above a combination of business liability policies (vehicles owned by the business).
- Professional Liability (Errors & Omissions) – Covers you for liability arising out of your professional services (doctor, lawyer, architect, engineer, insurance broker). Many commercial liability policies will specifically exclude coverage for professional services, so watch out for that.
You might think, “This sounds amazing, but how much will it cost me?”. Like many instances when dealing with insurance coverage, that depends. Things that will factor into your price can range from what you do, what you distribute, who you sell to, and many others.
Business liability insurance cost depends on how much risk there is associated with your business. An office is typically considered low risk, whereas a car repair garage could be considered higher risk. If your business sells products in the USA, there is an increased cost for that because they like to see more, and the settlements are typically higher than in Canada.
Take a few moments and do a quick risk assessment of your business. If you can think of any scenarios that could go wrong, Business Liability coverage would be very valuable to you and your business to have protection from unforeseen circumstances.
A good rule of thumb regarding Commercial General Liability and your business is that it’s far better to ask for permission than for forgiveness.
Connect with one of our brokers today to discuss your insurance needs to safeguard your business.
