Business insurance, which is also referred to as commercial insurance, provides individuals with protection from risks and liabilities for a wide variety of aspects of running a business. For example, businesses can purchase insurance that covers financial loss that results from defective products.
In the alternative, a business can also purchase an insurance policy that protects against property damages on the premises. It is not always feasible for a business to purchase insurance for every type of financial or economic loss it may face.
This is especially true for owners of small businesses. For example, the majority of small businesses are not equipped to pay for the full amount of losses that would be associated with property damage caused by a natural disaster or other type of unforeseeable, large-scale event.
Instead, a small business tends to purchase business insurance coverage for specific situations that frequently occur or are easy to predict that would lead to definite losses for the small business if the situation were to occur.
In order for a business to remain protected by business insurance, a company will typically pay a monthly premium to their insurance provider. The insurance provider, in turn, agrees to reimburse the business up to a certain amount of damages.
It may be helpful to consult with a local business lawyer for further advice regarding business insurance and which type of coverage may be best suited for a particular business.
What Is Small Business Liability Insurance?
Small business liability insurance is a type of commercial insurance that is available for certain businesses. In general, liability insurance is intended to provide financial coverage for a business in situations where they may be held liable for injuries or losses that are suffered by customers or visitors to their premises.
What Does Liability Insurance Cover?
The majority of businesses carry some form of liability insurance. Small business liability insurance, however, may focus on certain liability issues that are specific to smaller operations, which may include:
- Floor, carpet, or wooden deck hazards;
- Wet floor or spill claims, such as slip and fall claims;
- Claims involving stairs, elevators, or ladders;
- Lighting claims, as poor or inadequate lighting can often lead to various hazards and even robberies, including outside near parking lots;
- Walkways and parking lot hazards, such as debris and broken glass; and
- Other violations such as disabled individuals or handicap access.
What Is Not Covered by Liability Insurance?
Typically, liability insurance does cover certain acts or situations, including:
- Harm resulting from intentional acts of business owners or employees;
- Instances where the business knowingly violated business or ethics standards, including food safety hazard standards; or
- Certain losses where the business owner knew about the concerns and did nothing to prevent or remedy the situation.
In addition, the majority of insurance companies will provide liability coverage up to a certain dollar amount. An insurance company may pay for certain costs within this range, including:
- Court fees;
- Damages; and
- Other amounts.
Beyond these limits, however, a business may be responsible for the damages or costs incurred.
Is Small Business Insurance Required?
In most situations, small business insurance is not required. However, it is always a good idea for a business to purchase insurance to cover its assets.
This is because small business owners are typically taking a lot of risks and could lose everything if they are sued.
If My Small Business Is a Corporation or Limited Liability Company Do I Need Insurance?
Although having a small business formed as a corporation or limited liability company may save an individual from general liability, it does not save them from personal liability. Because most small businesses have under five employees, an employee or owner of a small company is far more likely to be personally liable when things go wrong than in a large corporation.
What Are the Most Common Types of Small Business Insurance?
There are two common types of small business insurance, liability insurance and property insurance. Property insurance protects an individual’s small business property from damage as well as loss.
Property insurance should cover fixtures of the property, including:
- Lighting fixtures;
- Special flooring and carpeting;
- Machinery or equipment, including:
- Stoves;
- Mixers; and
- Standing tools;
- Office furniture;
- Computers and computer-related items;
- Supplies and inventory; and
- Personal property that is kept on site.
Basic policies typically cover things such as:
- Fire;
- Explosions;
- Storms;
- Smoke;
- Riots;
- Vandalism; and
- Sprinkler leaks.
There are numerous different forms of liability insurance that may be available, including:
- Regular liability insurance: This type of insurance protects a business against damages that that business is ordered to pay to an individual who is injured on the property; and
- Product liability insurance: This type of insurance protects a business from lawsuits by customers who claim to be hurt by a product the business provided;
- Auto liability insurance covers damage that a business owner or an employee caused in a business-related accident.
Do I Need Insurance if I Have Employees?
If an individual is an employer, they will be subject to a number of additional insurance requirements. The majority of businesses with employees must pay for:
- Workers’ compensation insurance;
- Unemployment insurance; and
- State disability insurance.
What Happens in the Event of a Business Insurance Dispute?
If there is a dispute that arises related to business insurance coverage, a business should review the terms of their insurance policy. In the majority of cases, how to resolve the dispute can be found in the insurance policy documents.
This can help the court determine the rights of each of the parties to the contract as well as the extent of the coverage that was purchased. In certain cases, however, the contract may not contain clear language or it may contain vaguely defined terms.
In some cases, a court may be required to intervene to recommend the best course of action for the parties involved.
For example, a court may require the parties to amend or redraft part of the insurance contract. The court may also issue a monetary damages award if one of the parties is in breach of the contract terms.
Similar to many types of contract disputes, the outcome will depend primarily on the terms and conditions of the agreement of the parties as well as on the local and state laws that govern the contract issue in question.
Are There any Legal Remedies for Business Insurance Disputes?
Because a business insurance dispute is often based on contract law, many of the same legal remedies will be available to the prevailing party in a lawsuit. Examples of legal remedies that businesses may be able to recover in insurance disputes include:
- Monetary damages;
- Punitive damages;
- Statutory damages;
- Partial or full reimbursement for losses; and
- In some cases, criminal penalties.
Should I Contact a Lawyer Regarding My Small Business Insurance Issues?
If you are the owner of a small business, it is always a good idea to have a small business lawyer review all parts of your small business operation, especially if you are starting up a company. If you are going into a service industry, it is especially important to review potential insurance coverage.
Your insurance attorney can advise you of any insurance requirements in your state as well as possible liabilities your business may encounter.
