Who Needs General Liability Insurance?
Nearly anyone who has assets to protect against the possibility of a lawsuit needs general liability insurance. General liability insurance provides an overall layer of protection against liabilities that an individual or company generates as a normal course of doing business. It is separate from errors and omissions and malpractice coverage. General liability insurance protects you in case you have an accident in your company car, or if an employee has an accident while working on your behalf, or if a customer or passerby slips or falls or otherwise gets injured on your property.
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High-Risk Businesses
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Some businesses are at higher risks of generating lawsuits and liabilities than others. Rental real estate, and any business that operates a fleet of vehicles or has drivers out on the road can cause significant liability for a business owner, as can any labor-intensive business. Restaurants and bars are also frequent targets of lawsuits for anything ranging from contributing to drunk driving to sexual harassment claims to customers claiming injury or illness from food poisoning. The higher the likelihood of an accident, oversight or misunderstanding, the greater the need for general liability insurance.
Coverage
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General liability insurance typically covers the legal costs of defending against a lawsuit, as well as compensatory damages arising from claims of property damage, bodily injury, personal injury and damage from slander or false advertising. General liability insurance does not usually cover punitive damages, however.
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How Coverage is Structured
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General liability coverage is usually capped at a specific dollar amount for a policy period. If a business owner owns $2 million in liability coverage, but is successfully sued for $4 million, the insurance company picks up the $2 million, while the business owner remains liable for the remaining $2 million gap.
Umbrella Coverage
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Umbrella coverage exists to pick up where liability coverage leaves off. In the event of a lawsuit and judgment for an amount greater than that covered by a general liability plan, the umbrella coverage covers the difference up to a limit specified in the policy.
Considerations
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If juries in your state have a history of awarding high damage awards, you may wish to consider higher limits on general liability and umbrella coverage. In a March 22, 2010 Forbes article, Daniel Fisher identifies West Virginia, Alabama, Mississippi, California and Illinois as the worst states to get sued in in America.
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References
Resources
- "Asset Protection Book"; Jay Atkisson, Scott Riser; 2004
