The Basics of General Liability Insurance

Who?

Any business owner can purchase a general liability insurance policy – sometimes referred to as “Business Liability Insurance" or "Commercial General Liability." Different industries have different levels of risk to account for when it comes to potential claims on the policy. For example, a large steel supplier may have a greater risk of having a personal injury claim filed against them than an advertising company. Policies can be tailored to cover the claims that the business may face, and the level of coverage that is right for it.

What?

General liability insurance covers a broad range of incidents and lawsuits. It will cover medical expenses for a person injured on company property and property damage caused by its employees. These policies also cover the cost of legal defense, verdicts, and/or settlements if the business gets sued for something that occurs during its course of operating.

There are some situations that are not typically protected by general liability insurance coverage. Employee injuries are not covered; businesses need workers' compensation insurance for these types of claims. A basic business general liability insurance policy also won’t cover a professional mistake. A professional mishap could occur when an employee offers his or her opinion, solution, service or recommendations in the course of business. Finally, general business liability insurance does not cover auto accidents. Businesses should purchase separate auto policies.

When?

General business liability insurance can be purchased at any time. If a business makes a change that alters its level of litigation, such as hiring staff to work in a warehouse or renting a large new facility, it should reexamine its policy to be sure that it still has the appropriate amount of coverage. If an incident occurs that could lead to a claim against the business, or if the business gets sued, it should contact the insurance company soon to make a claim.

Where?

Businesses operating in any state should consider business liability insurance. There are some states whose citizens are more litigious than others. Businesses should consider the rate of civil suits filed in that jurisdiction, whether the courts and jury pools are more plaintiff-friendly, and how robust the plaintiff’s bar is. In those jurisdictions, defendants may be forced to pay out higher settlement and verdicts.

The American Tort Reform Foundation issues a Judicial Hellholes® report where it identifies the nation’s “most unfair” jurisdictions in the handling of civil litigation. Its 2015-2016 report named courts in California, New York City, Florida, Missouri, Illinois, Louisiana, Texas and Virginia as Judicial Hellholes for business defendants.

Why?

The cost of litigation that goes all the way through trial can cost a business upwards of $100,000. On the other hand, annual premiums for general business liability policies range from $750 to $2,000 depending on the type of business and coverage needs. One personal injury lawsuit can more than cover the cost of the premiums.