So, What If I Get Sued?

We hear it said all the time: We live in a litigious society.

Before we get started, the simple definition of the word “litigious” is: inclined to go to law; tending or wanting to take legal action.

And so we do live in a litigious society! And as a business owner, you should be aware that more likely than not, you will be a target.

In 2010, the number of lawsuits filed in state courts was over 15 million. That is approximately one new law suit every two seconds. In terms of population, that’s one law suit for every 12 adults in this country.

During the same timeframe, the swelling numbers of malpractice law suits and resulting soaring premiums for malpractice insurance forced 10% of American obstetrician/gynecologists to stop delivering babies.

You will want to be sure that your general liability insurance is appropriate for your risk. It is that policy which protects your business when it is sued for something that is alleged your business did or did not do which contributed to property damage or personal injury to another person.

Furthermore, this coverage will pay those damages, but it will also pay toward the attorney fees and court costs, whether the law suit has merit or not.

The exclusions which usually go along with this sort of policy include employees’ claims of wrongful termination or discrimination, harassment, or wrongful termination. These sorts of suits are addressed by professional liability coverage and employee related practices coverage.

Don’t risk all you have worked for by neglecting this important coverage. Your licensed insurance professional will guide you to what coverage is needed today, and more important, how to protect the future as you grow your business.

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Understanding Commercial Liability Insurance

This is what you need to understand regarding commercial liability insurance:

Along with property and workers compensation insurance, general liability insurance is a must have for almost all companies. Liability insurance protects the assets of a business when it is sued by a third party for alleged injury or property damage.

Liability insurance can be purchased separately or as part of a Business Owners Package, which bundles property and liability insurance into one policy. When liability insurance is purchased as part of a B.O.P., the coverage limits are generally lower, so higher risk companies that need more coverage may choose to purchase liability insurance as a separate policy, or, add a commercial liability umbrella policy on top of the B.O.P. for additional protection.

The coverage a business needs depends on several factors. Business owners should consider the amount of risk associated with their type business. For example, a business that manufactures heavy machinery is likely at a greater risk of being sued than a company that manufactures linens, and would, therefore, need more liability insurance.

Another factor to consider is where your business is located. The volume and success of litigation varies dramatically from state to state. If a business is in a state that seems to favor high damage awards to plaintiffs, that business will need more liability protection.  This information is often available from your state department of insurance.

With a liability insurance policy, the insurer is obligated to pay the defense and legal fees of a covered claim or lawsuit. Covered liability claims normally include bodily injury, property damage, personal injury and advertising injury. The insurance company would also pay any compensatory or general damages that the business becomes legally obligated to pay.  It’s important to remember that punitive damages are not covered under general liability insurance policies because they are considered punishment for intentional acts.

General liability insurance policies always state a maximum amount that the insurer will pay during the policy period. Usually these policies also list the maximum amount the insurer will pay per “occurrence”.

For example, if a company has a $1 million “occurrence” cap in their liability policy and they are sued and receive a $1.5 million judgment against them, the insurer would pay $1 million and the business would be responsible for the additional half-million dollars. To cover these types of situations, most companies can purchase Umbrella Liability Insurance, which would cover payments in excess of the policy limits and provide coverage for liabilities not covered in a standard liability insurance policy as noted earlier.

Today, lawsuits are often brought for the most minor claims. For this reason, most insurance companies require their policyholders to report any accidents that could lead to a liability claim as soon as possible. The insurer may then require the business owner to document the situation, forward all summons and legal notices and cooperate fully in any investigations.  This allows the maximum protection for your business and the insurer to prepare adequately for the claim.

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Types Of Insurance Any Business Owner Should Own

There are a few types of insurance any business owner or business should own, and the include (but are not limited to)…

Life Insurance. Life insurance protects loved ones against your death, but it can also be used to benefit your business–or save–your business. If you have life insurance, the insurer pays a certain amount of money to a beneficiary upon your death. You pay a premium in exchange for the payment of benefits to the beneficiary. This type of insurance is very important because it allows for peace of mind both personally and professionally; having life insurance allows you to know that your loved ones or company will not be burdened financially upon your death.

General Liability Insurance. Every business, even if home-based, needs to        have liability insurance.  The policy provides legal defense and settlements or awards of damages if you, your employees or your products or services cause or are alleged to have caused bodily injury or damage to a third party.

Property Insurance.  If you own your building or lease space, or if you store business property at your home including office equipment, computers, inventory or tools, you should consider purchasing a policy that will protect you in case of fire, vandalism, theft, smoke damage etc.  You may also want to consider business interruption/loss of earning insurance as part of the policy to protect your earnings if the business is unable to operate–if income is hindered, you still have to pay your obligations, and these coverages can help you do that.

Commercial Auto Insurance. Commercial auto insurance protects company owned vehicles that carry employees, company products or equipment. With commercial auto insurance you can insure your work cars, SUVs, vans and trucks from damage and collisions.  If you do not have company vehicles, but employees drive their own cars on company business you should have non-owned auto liability to protect the company in case the employee does not have insurance or has inadequate coverage.  Many times the non-owned can be added to a Business Owner’s Policy which combines general liability and property insurance.

Homeowners and Personal Auto Insurance. As your business grows, your personal assets do as well, generally speaking.  Don’t neglect your personal insurance needs; increase your coverage limits as your assets grow.

Umbrella Insurance. You may want some additional coverage, on top of insurance policies you already have. This is where an umbrella policy comes into play. This type of insurance is an extension to an already existing insurance policy and covers beyond the regular policy. This insurance can cover different kinds of claims, including homeowner’s or auto insurance. Generally, it is sold in increments of $1 million and is used only when liability on other policies has been exhausted.  Any business owner should consider this policy to protect their hard earned personal assets.

Nothing can replace speaking with a knowledgeable insurance professional about the types of commercial insurance policies, and determining what your business needs now, and in the future as it grows.

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Things To Consider: What Could Go Wrong?

Purchasing business insurance? It’s about what can go wrong.

When you start a business, it’s all about dreams and possibilities.  You have to be optimistic and know the future holds promise.  When purchasing insurance, it’s about protecting those dreams and insuring the security of the future.

When purchasing insurance, you need to think of all that can wrong, not right.  A doomsday assessment if you will to pinpoint those key areas of risk to your business. Conduct a risk assessment specific to your business.

Consider the possibilities of a client or customer slipping and injuring themselves and suing you.   What are all the issues that would face your business from the loss of a fire or natural disaster?  What about a car accident involving your business or an employee?

In addition to your own risk assessment, ask others to do one as well.  Your insurance agent should be willing and able to conduct a risk assessment.  Compare notes and see where coverage may be lacking.  Call or visit your state department of insurance and ask to review the types of claims specific to your industry or related industries.

In addition to general liability and property insurance coverage, consider some other types of coverage.  Business interruption insurance covers the losses of income while you business rebuilds or relocates.  Workers compensation protects employees from medical expenses and provides an income from work related claims.  Equipment breakdown insurance covers costly repairs and replacement to major equipment essential to your operation.

Check with your insurance provider about whether professional liability or errors and omissions insurance is needed.

Build your business on a dream.  Insure your business by knowing and understanding what nightmares exist.  Have the hard conversation with your agent and determine what you need for coverage for your business.

Liability Insurance: What Does It Cover?

A general liability insurance policy is something all businesses need. Such policies reduce your risk of exposure by protecting the business from personal injury and from property damage which is caused by your business causes by either not doing or not doing properly.

General liability insurance is meant to cover personal injury, bodily injury, property damage, and unforeseen circumstances which affect your business or work product.

What general liability will not cover, however, are such things as failure to perform duties to your industry standard, professional negligence, or product liability.

Now, you may be saying to yourself, “I am an excellent worker in my craft. I go above and beyond all the time.” But accidents do happen. You may be distracted or clumsy one day, and that’s all you need in order to be wiped out if you have no coverage.

Aside from that, even if you are always perfect at your craft, it is not outside the realm of possibility that a client or customer says that your work or product caused them pain and suffering. That client or customer could be 100% wrong or just filing a claim in the hopes that you’ll settle, but that in itself is enough to cost you a pretty penny in lost time from work, lawyers’ fees, or court costs. And that could be enough to drive you to bankruptcy.

Realtors, doctors, accountants, soap and candle makers, and computer repair people are only a handful of the types of businesses which will likely need errors & omissions policies.

As we so often counsel you, talk to your licensed insurance professional for help in determining what coverages you need to protect yourself from risks.

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Part-Time Business Insurance

Statistics show that approximately 10% of households operate a home-based business; businesses such as desktop publishing, car repair, consulting, or tailoring.

And so we hear this question from time to time: Does my part time business need insurance?

It is not an uncommon assumption that such businesses are covered by the homeowners insurance. This is actually not the case. And the assumption often puts part-time business owners at risk for serious financial damage in cases which involve accidents, clients who believe they have been damaged due to one service or another of the business, errors and omissions, or damage to a computer, website, or loss due to bad weather.

Indeed most homeowners insurance policies will not cover business-related losses. Frequently, a business rider can be added to the homeowners policy, and in some cases, simple businesses will need nothing more than that.

But if you are doing repair work or any sort of manufacturing, you are likely to need more commercial coverage than a rider. A general liability insurance policy, and/or business property insurance.

Additionally, if you have even one employee, you will need workers comp insurance.

And going without is perilous to your pocketbook as well as your home, property, or more!

Protect your home, your business, and your security by talking to your licensed insurance professional in order to determine just what coverages you need.

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Business Owner’s Insurance: Keeping It Simple

I am a firm believer in living life by the principle of K.I.S.S.

For the uninitiated, the acronym means “Keep It Simple, Silly.” Well, actually, the second “S” can be any of a lot of things, but we’re keeping this polite.

The idea is, the simpler you make solutions, the less complications you will be met with if those solutions go south.

That being the case, let’s look at business insurance in its simplest forms.

General Liability Insurance:
General liability insurance protects you against damages, injuries, or other risks of liabilities which may be imposed by lawsuits which are sustained at your place of business by a third party.

Workers Compensation Insurance:
Workers Comp insurance is the form of insurance which provides medical benefits and wage replacement to your employees who are injured on the job. Some states also require that businesses provide additional coverage as well. Your licensed insurance professional can help you to determine what coverage is mandatory and what is prudent for you.

Buildings and Property Insurance:
Building insurance is also called commercial building insurance or property and casualty insurance. This coverage which protects financial risks due to damage to or loss of a physical structure that the insured owns or leases. There are some losses which are not automatically covered by this type of insurance. Flood damage, for example, is usually not covered automatically. So if you lived in a flood zone, you would want to work with your licensed insurance professional in order to ensure that your potential flood losses are insured.
Commercial Vehicle Insurance
A commercial auto insurance policy covers business vehicles and their drivers. If your circumstances dictate it, your auto coverage can be combined with property and casualty insurance in your business owner’s policy. It is important to note that it is a fact that many business owners assume a variety of risks by using their cars and assuming a personal auto policy will cover any risk.
There are numerous kinds of additional insurance which are available to business.  Again, it is a fine idea to have a thorough and frank discussion with your licensed business insurance professional in order to make the best decisions about the options which are available for your business.

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Knowing Your Coverage Of General Liability Is Important

Today, a spilled cup of coffee or the twist of a knee on your property can result in a lawsuit.  As a business owner, you need to be keenly aware that what appears to be a minor incident could result in a big legal problem.

General liability insurance, property insurance, and worker’s compensation insurance are a must to be in business.  General liability insurance will protect the assets of your business in the event it is sued for something perceived (right or wrong) to have done to injure or cause damage.

General liability coverage can be purchased as part of a business owner’s policy or separately.  A business owner’s policy will package the liability with the property insurance.  Sometimes, when part of a business owner’s policy, the liability limits could be fairly low.

Make sure to review and assess risk with your commercial insurance agent.  Keep in mind what can be your perceived risk, like operating a lot of heavy machinery or have a fleet of vehicles on the road.  How does it differ from other businesses you know? Look to trade associations, the state department of insurance and your agent for guidance regarding damage awards in your state as well.

The general liability coverage will include legal fees and damages in a covered claim and/or lawsuit.  Bodily injury, property damage, personal injury, and general damages are normally covered.  Punitive damages are usually not covered as they are awarded when it is determined the act was intentional.

In addition, your policy will spell out maximum coverage and limits during the policy period.   It may make sense to purchase a commercial umbrella policy to cover additional risk.  Review the limits and work with your commercial to determine what is best for your business.

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Keep Your Commercial Insurance Up To Date!

As your business grows, make sure your commercial insurance coverage is up to date.

You went into business knowing you had a good thing going.  You’ve worked hard and things are really starting to fall into place. Business is good, growing, and you continue to exceed expectations and your plan. Your banker is ecstatic, your employees are excited, and it’s a fun time to be in business.  Have you let your commercial insurance broker know how well your business is doing?

When a business first opens, a somewhat standard business insurance package is put into place.  Depending on the business, some type of general liability insurance and business property insurance is put into place.  Many times, the coverage is adequate, and sometimes lean to help keep premiums down.  Now, back to the business description noted above, the first key is new employees.

As soon as an employee is hired, with rare exception, you are required to have workers compensation insurance.  Besides the employee benefit, with workers compensation coverage, the employee cannot sue the business for being injured on the job in most cases.  Imagine what could happen if it wasn’t in place!

As your business grows, your business insurance needs change.  The business insurance package you put into place is not static any more than the any other changes in your business.  There is nothing worse than growing your business, seeing great success, and having one incident cause financial crisis by being under insured, or, worse yet, have no coverage for that event.  Let’s look at how to avoid that happening in your business.

Again, with the quick example above, business is thriving.  It’s probably time to up the coverage limits, perhaps even write new insurance.  As your business grows, it may be time to look at business interruption insurance which may also be known as loss of income.  It’s quite possible you need mechanical breakdown insurance, or now should add some additional disaster insurance such as flood insurance if your area warrants it.

Talk with your commercial insurance broker to determine if product liability insurance may be needed.  Do you need to add professional liability insurance?  What coverage may fit now that didn’t early on? Do you need to raise your general liability limits?  Is it time for commercial vehicle coverage?

The rewards of growing a business are numerous.  Don’t risk it by not growing and evaluating your risk exposure along the way.  Make time to speak with your commercial insurance agent at length at least once a year, perhaps more if needed while growing your business.

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Commercial Insurance Agents

It’s a well-known fact that business owners and entrepreneurs have a passion for what they do.  Whether you’re an accountant, a tow truck company, a delivery service, or a flower shop, something ignited within you to risk opening your own small business.  Many business owners forget to focus some of this fire into protecting the business and the assets they have in place.

Chances are pretty good that if you have been in business for any amount of time, you have some commercial insurance in place.  It’s also a pretty good chance that it’s time to focus on the coverage in place and make sure you are protecting the business and yourself properly.

Do you look at your commercial insurance as just a necessity and have to look up your agent’s name?  If so, it may be time to re-evaluate that outlook.  It’s important to make your licensed insurance professional part of your key advisory team.  No doubt you use a CPA for your taxes and attorney for your legal issues, but do you consider your commercial insurance agent in the same category?  If not, let’s examine why you should change that outlook.

You took considerable personal and financial risk in starting a business.  Why continue to expose your business and assets without proper protection.  One frivolous lawsuit can ruin a business.  Do you know if your general liability insurance would cover that type of lawsuit?  Do you know whether or not you need additional liability coverage from Professional Liability insurance?  Is your equipment and office fully covered under your present property insurance?  Do you know how the value of the claim will be determined?  Is it replacement cost or actual cash value?  Do you need loss of income or mechanical breakdown insurance now?  What natural disasters are covered?

Your commercial insurance agent needs to become a key part of your team.  Bring them up to date and spend some time with them.  Let them know what has changed in your business and where you project the future to be so are fully covered.  Make sure you have the proper coverage in place to protect the hard work and passion you bring to work every day.