10 minute read
Whether you’re a consultant, you own your own retail business or work as a contractor or skilled tradesperson one of the most important types of insurance coverages you need to protect your business is commercial general liability (CGL) insurance. Lawsuits against your business can not only affect your bottom line, but may also damage your reputation with your clients or customers. Understanding the risks your business faces and having the right CGL coverage to protect you from those risks is an important step in safeguarding your operations.
When dealing with small businesses, liability refers to your company being responsible for damages to a third party in the eyes of the law. As soon as you decide to start your own business, you’re exposed to a variety of liability risks. In some instances, your business may not do anything wrong and you may still find yourself tangled up with a lawsuit. Having the right insurance coverage can help mitigate the losses you experience from liability claims.
Commercial general liability insurance is designed to protect you and your business from a loss if you’re found legally liable for bodily injuries or property damage to a third party caused by the product you sell or the service you provide. CGL insurance can also offer protection in situations where you or your staff are conducting business offsite.
A CGL policy can help mitigate your loss when your business is found liable for an injury to a third party either on or off your premises.
A CGL policy can help mitigate your loss when your business is found liable for an injury to a third party either on or off your premises. For example, if a customer is coming up the steps to your retail store and they slip and fall, they can file a lawsuit against your business for any injury that was caused. According to the Canadian Institute for Health Information, falls are sending more Canadians to the emergency department than ever before.
It’s important to ensure you’re protected from this type of liability. A bodily injury liability assumes that some sort of negligence took place for the injury to happen, but this doesn’t necessarily mean the negligence has to come directly from your business. If someone is responsible for their own injury on your property, they could still file a liability claim against you. For example, if there was nothing wrong with the steps to your store (they weren’t icy, wet, slippery, blocked by a hazard etc.) and a customer still managed to trip, you may still face legal action.
Bodily injuries can happen to anyone who’s physically present at your business including:
- Maintenance personnel
- Delivery persons
- Any other type of visitor
Bodily injury liability claims can lead to large financial consequences for expenses related to:
- Pain and suffering
- Lost wages
- Medical bills
Property damage liability:
Property damage liability is a serious concern for small business owners. If you’re found legally liable for damages made to a third party’s property, you could face costly legal expenses. It can also have a negative impact on your reputation with your clientele. CGL insurance is designed to help mitigate the costs that may be associated if your business is found liable for property damage to a third party either on or off your premises. For example, if you own an automotive body shop and someone claims that damage was done to their vehicle while it was in your possession, you could face a property liability claim. Another example would be if you’re a caterer, and you’re catering an event offsite. If someone claims you or an employee of yours damaged their property during the event, you could face a property liability lawsuit. Incidents that related to property damage may also be grouped with other types of liability concerns in one claim. Often, property and product liability claims overlap when the damage is the result of a faulty product.
No matter how small your business is—it’s still at risk for various forms of liability
Do I need CGL insurance?
Some small business owners don’t know they need liability insurance, or think it’s too expensive. The truth is, no matter how small your business is, even if it’s run from your home —it’s still at risk for various forms of liability. In fact, the smaller your business is the worse the implications of a liability claim can be. At the bare minimum, every business should have a standard CGL policy to protect them from risk and loss. Some of the consequences of operating without CGL insurance may include:
- If you’re found legally liable for bodily injury or property damage to a third party, your company may have to pay the costs associated with the legal process and any financial losses that stem from the lawsuit.
- Your reputation with your clients/ customers could be severely damaged. Consumers need to feel a sense of trust with companies and brands. A lawsuit could shatter that sense of trust if handled poorly.
- There are a lot of scenarios where you may be asked to provide proof of insurance. If your business participates in events such as tradeshows or markets, the venue will often request that participants provide a certificate of liability coverage. If you’re a contractor or skilled tradesperson, some of your customers will require proof of insurance prior to allowing you to conduct work on their property.
Think commercial general liability coverage is what your small business needs?
Other coverage options to consider:
Product liability insurance: Product liability insurance is often included in a CGL policy but not always. It’s important to double check that your small business insurance policy does protect you from risks associated with product liability claims.
Cyber risk and data breach coverage. Cyber attacks are an ongoing threat to small businesses and have continued to rise recently. Cyber event expense coverage is designed to help small businesses that rely on technology mitigate some of the expenses that may incur as a result of a cyber hack.
Professional Liability: If one of your clients or customers claims your advice caused them a financial loss, your professional liability coverage can help you recover from the financial consequences that may incur. This coverage is also known as errors and omissions (E&O) coverage.
Property insurance: As a small business owner, you likely rely on your property, tools, equipment and technology to help keep your business running. If one of those key pieces of the puzzle was damaged and needed repair, you may not be able to continue operations. This is when you need property insurance coverage.
Equipment breakdown insurance: Your equipment is covered in your property insurance policy for damage caused by external sources, such as fire, floods and weather damage; however, you may not be covered for electrical or mechanical damage. In these situations, you’d look to your equipment breakdown insurance.
Commercial auto insurance: If you or your employees use your vehicle for business purposes, you may need commercial auto insurance to protect that vehicle in ways your personal auto policy may not be able to. Find out if you need commercial insurance.