What is General Liability?

A lawsuit. It’s an event no business owner wants to see on their daily schedule. It can not only interrupt your business, it can cost you thousands of dollars in legal fees and possible payments if you’re found liable.

That’s where general liability insurance can help. It’s a coverage many small business owners purchase and it can be a cost-effective way to handle the costs from a variety of claims, including:

• Bodily injury claims: If someone gets hurt at your business (and they’re not one of your employees), it can help cover their medical bills.
• Property damage claims: If you accidentally damage someone else’s property, it can help pay for repairs or replacements.
• If a bodily injury or property damage claim results in a lawsuit, general liability insurance can help pay for legal fees, court costs, and any money you might owe to the person who sued you.
• It can also help cover legal costs if you’re sued for things like accidentally using copyrighted material in your advertising or making false claims about another business.
• If your business sells products, and one of them causes damage or injury (and your policy covers this), it can help pay for those costs, too.

What is a Claim and What is a Lawsuit?

Let’s start with a claim. That’s when you contact your insurance company when something happens that your insurance policy covers. For example, if someone trips and gets hurt in your store or you accidentally damage a customer’s property.

After you file a claim, the insurance company will assign an insurance adjuster to examine and investigate it, and sometimes the insurance adjuster may visit your business to look into what happened. The insurance adjuster will also try to resolve the claim with the person who was injured or whose property was damaged. You’ll need to work together with the insurance adjuster as part of this process.

Unfortunately, sometimes a claim can turn into a lawsuit. This happens when someone decides to take you to court to ask for money because they believe you’re responsible for their injury or damage.
Your general liability policy usually covers your legal costs, such as lawyers and court fees. Your policy also may cover paying damages to the person who sued you—– up to the limit of your insurance policy.

How Does General Liability Insurance Help Cover Claims?

With general liability coverage, the insurance company steps in to help you with claims or lawsuits. They can help you find a lawyer, and sometimes they can even help you avoid going to court at all.

If a claim is made against your policy or in the early stages if you’re sued, your insurance company can help try to negotiate a settlement early in the process. This can save you a lot of time and money compared to lengthy discovery or even a trial.

For all the examples above, your insurance company would help cover legal costs that could include:

• Paying for a lawyer to represent your business in court;
• Covering court costs; and
• Paying the final amount if the judge or jury says you owe money (up to your policy’s’s limit).

What’s not Covered by a General Liability Policy?

While general liability can be a business owner’s best friend, there are some things it doesn’t cover (but there are other types of policies that can help there).

Injured or sick employees. 

If an employee gets hurt or becomes ill while on the job, you would need workers’ compensation insurance to cover medical expenses, rehabilitation costs, lost wages, and more.

Problems with your work.

If a customer is unhappy with the quality of your work or if you miss a deadline, general liability won’t’t cover it. You might need a separate policy called professional liability insurance (sometimes known as “errors and omissions” insurance). 

Damage to your business equipment or property. 

General liability covers damage to other people’s’s property, but not damage to your own business property such as your building, equipment, or inventory. To protect your tools and equipment, you should consider inland marine insurance. If you have a store, building, or work space, a business owner’s’s policy (BOP) often combines general liability and commercial property insurance, and it’s often cheaper than buying them separately.