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A Commercial General Liability insurance policy is generally triggered when a small business or its owner is sued because another person is injured, or somebody else’s property has been damaged. Most commonly, a claim occurs if there is a slip and fall on the small business premises and the injured person sues. Sometimes in the course of operations somebody else’s property could be damaged, and they’ll sue to re-coup their losses.
Regardless of if a small business is at fault, it can be accused of negligence and sued for many different things, making general liability a very important insurance coverage for operating a small business. General liability will apply to a nonprofit or individual similarly, to cover lawsuits accusing them of negligence.
Many small business owners would be personally liable for these costs even if the business could not pay on its own.
Why does my small business need General Liability insurance?
Unfortunately there are many risks with operating a small business that can cause another person to be injured, or another person’s belongings to be damaged. In the event something happens, or a small business is accused of negligence, defending a lawsuit can be very expensive. General Liability insurance will pay for the costs of defending the lawsuit, and any resulting court award or out of court settlement. Many small business owners would be personally liable for these costs even if the business could not pay on its own.
As it is so important, many leases and other types of contracts will require that a small business has General Liability insurance. It is very difficult to interact with suppliers and customers without one.
How does a Commercial General Liability insurance policy respond to a lawsuit?
When the lawsuit occurs, the General Liability policy will pay for legal defense costs as well as any court ordered award or out of court settlement, subject to the conditions of the policy wording. It can often be confusing what is covered and how coverage is triggered under this policy. Unlike a medical insurance policy that most people are familiar with, there has to be an accusation of negligence (lawsuit) to trigger the Commercial General Liability policy.
The commercial general liability policy is broken into a few standard sections:
A) Bodily injury and property damage
B) Personal injury & advertising injury
C) Medical expenses
D) Tenants Legal Liability
What is covered on a General Liability insurance policy?
What does Bodily Injury cover under a General Liability policy for small business?
Bodily injury is when a third party (somebody outside of the business) sues alleging that the small business was negligent causing them to be physically hurt. For example if they slipped on a wet floor of a retail store, and hurt their arm and could not work for several months. They could sue for lost wages, emotional trauma, or other damages associated with being injured as a result of the negligence of the small business. Regardless of if the small business is at fault somebody can sue them accusing them of negligence, and the small business must pay for a lawyer to defend the suit, thus enforcing the importance of this insurance coverage.
What does Property Damage cover under a General Liability policy for small business?
The property damage section covered under a small business Commercial General Liability policy is triggered when a business is sued for negligence that has caused damaged the property of somebody else. This is an important distinction from a Contents or Property insurance policy, which covers your own stuff if there is a fire and wouldn’t require a lawsuit to trigger the policy.
An example of a general liability claim for property damage could be that you are operating a machine at a job site and it hits an adjacent building, causing significant damage to the wall of the building. The owner of that building would likely sue your small business to recover the costs to fix the building, and potentially any lost revenue if the building became unusable. These types of claims are especially frequent for contractors or small businesses that operate at other peoples locations.
What does tenants legal liability cover under a general liability policy for small business?
Tenants legal liability (TLL) covers damages to property resulting from leasing, renting, or occupying space as a tenant. This could be damaging the flooring or carpeting of the unit your small business is leasing by spilling something, resulting in the flooring needing to be replaced. Property owned, rented or occupied by your small business is excluded under the bodily injury and property damage section of the policy and any associated damages will be covered in this section of the policy under as TLL.
What does Personal Injury & Advertising Injury cover under a General Liability policy?
What does Personal Injury & Advertising Injury cover under a General Liability policy for small business?
These two coverage components, like the rest of the general liability policy, can be triggered when your small business is sued for one of the following things.
Personal Injury means:
(a) False arrest, detention or imprisonment;
(b) Malicious prosecution;
(c) Wrongful entry into, or eviction of a person from, a room, dwelling or premises that the person occupies;
(d) Oral or written publication of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services; or
(e) Oral or written publication of material that violates a person’s right of privacy.
Advertising Injury means:
(a) Oral or written publication of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services;
(b) Oral or written publication of material that violates a person’s right of privacy;
(c) Misappropriation of advertising ideas or style of doing business.
These items are subject to the conditions of the policy wording, but cover the non-physical damages that another person or business may suffer as a result of your small business operations. It is important to note that regardless of if the business is at fault, it can be accused of items here, like libel or slander, and the small business must pay legal fees to defend itself.