Sometimes in life, there are situations where we accidentally end up causing damage or harm to someone’s property without even meaning to. This negligence claim can result in expensive lawsuits if you are not careful enough.
General Liability Insurance Policy protects individuals and businesses from financial losses due to third-party claims of bodily injury, property damage, or personal liability insurance. It usually covers accidents on your premises or during your business operations.
But the question is, do General Liability Insurance policies cover negligence? The answer to this question is not a simple yes or no. It depends on the specific circumstances and details of the incident.
Purchase Liability Insurance claims negligence in some cases. However, there are situations where purchasing Liability Insurance may not cover negligence. Toth Felty, LLP states that “negligence is an unintentional tort covered by a general liability policy.”
This article will discuss some scenarios where General Liability Insurance may cover negligence and others where it may not. Let’s get started.
Liability Insurance | A Basic Intro
At its core, liability insurance is part of the general insurance system designed to protect the policyholder from financial loss resulting from claims of legal liability for injuries, damage, or negligence.
This type of insurance covers the legal cost and payouts for which the insured party would be found liable if it’s established that the party had been negligent or caused damage.
Provisions typically include bodily injury, property damage, personal injury, and other potential risks that can result in legal liability.
It’s worth mentioning that there are several types of liability insurance, including General Liability Insurance, Professional Liability Insurance, and Directors and Officers Liability Insurance, each serving different purposes and covering various scenarios.
Who Needs Liability Insurance
Liability Insurance is crucial for any individual or business that could be legally liable for damages to third parties. This includes companies of all sizes, independent contractors, and self-employed individuals who provide services to clients. While some states may not require liability insurance by law, protecting oneself from costly lawsuits is still a wise investment.
- Small And Medium-Sized Businesses
Small and medium-sized businesses form the first group that critically needs liability insurance. Irrespective of the industry, these businesses interact with clients, suppliers, and sometimes, the public, exposing themselves to potential lawsuits from third-party claims. General Liability Insurance helps safeguard these businesses from financial losses due to claims of property damage, bodily injury, or personal injury resulting from their business operations.
- Professionals Offering Consultation Services
Professionals offering consultation services, such as lawyers, accountants, financial advisors, and doctors, require Professional Liability Insurance. This insurance, also known as Errors and Omissions Insurance, protects against financial losses due to mistakes made (errors) or services not provided (omissions) as part of their professional duties.
- Directors And Officers Of Corporations
Directors and officers of corporations are another group that needs liability insurance. Directors and Officers Liability Insurance protects these top-level executives from personal losses if they are sued for alleged wrongful acts while managing a company. It also covers legal fees, settlements, and other costs the company may incur in such a lawsuit.
- Construction And Skilled Trade Workers
Workers involved in construction and other skilled trades like plumbing, carpentry, and electrical work should also consider liability insurance. They work in environments with a relatively high risk of causing property damage or bodily injury. Thus, liability insurance can protect them from the potential financial burden of these risks.
Event organizers often need liability insurance as well. Accidents can happen, and sometimes, attendees may get injured or damage property during an event. Event Liability Insurance covers claims for such incidents, providing financial protection to the organizer.
Individuals and businesses that interact with third parties, offer professional advice, hold positions of responsibility, work in hazardous environments, or organize events are among those who need liability insurance. A safety net provides financial protection from risks and uncertainties inherent in these activities.
Liability Insurance | Coverage
General Liability Insurance is a comprehensive coverage plan that addresses numerous potential risk areas. Its central purpose is to protect your business from significant financial losses that could arise due to third-party claims. The range of coverage provided typically includes bodily injury, property damage, and personal and advertising injury.
Bodily Injury And Property Damage Liability
This is the core coverage area of General Liability Insurance. It steps in when a third party suffers bodily injury or property damage due to your business operations – whether it’s an accident in your premises or as a result of a product your company sold. Similarly, if your business operation inadvertently damages a customer’s property, the repair or replacement costs would be covered under property damage liability.
Personal And Advertising Injury Liability
Personal and Advertising Injury Liability cover damages arising from non-physical injuries inflicted by your business. This includes libel, slander, false arrest, copyright infringement, wrongful eviction, and invasion of privacy. For instance, if your company’s advertising content falsely depicts a competitor negatively, your Liability Insurance could cover the resulting legal expenses and settlement costs.
Business Liability Insurance usually incorporates medical payment coverage. This pays for immediate medical expenses (like first-aid or ambulance costs) when someone is injured in an accident on your premises or due to your operations – regardless of who is at fault. It’s important to note that medical payment coverage is typically limited and is not a substitute for comprehensive health insurance.
Damage To Premises Rented To You
Also known as ‘Fire Legal Liability,’ this coverage is for property damage to premises rented by your business. For example, if a fire that starts in your rented office space causes damage to the building, this coverage would handle the repair costs.
Legal Defense Costs
General Liability Insurance covers legal defense costs, including attorney fees, court expenses, and settlements or judgments. This is crucial because even if a lawsuit against your business is unsuccessful, you may still incur substantial costs in defending yourself. With General Liability Insurance, you can focus on running your business without worrying about the financial implications of legal action.
What Is Excluded From The Coverage Of Liability Insurance?
While Liability Insurance provides comprehensive coverage, there are certain exclusions to remember. These exclusions may vary depending on the insurance company and the specific policy, but here are some common scenarios that General Liability Insurance may not cover:
Intentional And Criminal Acts
Liability insurance does not cover intentional or criminal acts. If it is proven that the insured intentionally caused the damage or was involved in illegal activities leading to the claim, the insurer will not provide coverage. This exclusion applies even if the insured’s actions were intended to prevent a perceived greater harm.
Commercial General Liability insurance often excludes contractual liabilities, which are obligations agreed upon in a contract signed by the insured. For instance, if a business signs a contract agreeing to be responsible for any damages that occur during a project, these damages would not be covered by a standard liability insurance policy unless the agreement is included in the “insured contracts” within the policy.
Work-Related Injuries To Employees
Any injuries to employees during their employment are not covered by general liability insurance. These injuries are typically covered by worker’s compensation insurance, a separate policy that businesses must carry in most states.
Damage To the Insured’s Own Property
General liability insurance covers damage to third-party property caused by the insured and space. It does not cover damage to the insured’s property. Property insurance is typically purchased separately to protect the insured’s property.
Professional Errors And Omissions
General liability insurance does not cover liabilities arising from professional errors, mistakes, or negligence. These are covered by professional liability insurance (also known as errors & omissions insurance), a separate type of coverage.
General liability insurance does not cover auto-related incidents. Commercial auto insurance is needed for businesses to cover liabilities related to using vehicles for business purposes. Personal auto insurance will cover liabilities related to using vehicles for non-business purposes.
Courts sometimes award punitive damages to punish and deter wrongful conduct. Though these vary by jurisdiction, liability insurance policies generally exclude coverage for punitive damages, especially if the damages are related to intentional acts.
Known Claims And Prior Acts
Liability insurance operates on a claims-made basis, which covers claims made during the policy period. It won’t cover claims for incidents before the policy was active, known as “prior acts.” In addition, if the insured were aware of a potential claim before the policy began, this “known claim” would be excluded from coverage.
.Many general liability policies exclude pollution coverage unless a sudden and accidental event causes it. Businesses that handle hazardous substances may need to purchase a separate environmental or pollution liability policy for workers’ compensation insurance.
While liability insurance is essential for protecting businesses and individuals from a wide range of risks, it’s important to understand its limitations. The exclusions above are standard to many policies, but exclusions can vary by insurer and policy type. Toth Felty Insurance can help you navigate the complexities of liability insurance and find the right coverage for your specific needs.
Can General Liability Insurance Provide Coverage For Negligence?
General Liability Insurance typically covers negligence that leads to third-party bodily injuries, property damage, or reputational harm. Negligence is a legal concept involving a failure to exercise the care a reasonable person would exercise in similar circumstances.
These circumstances could include accidents caused by a business’s carelessness or oversight, such as a customer slipping and falling on a wet floor that is not marked as hazardous.
What Constitutes Negligence?
It is essential to understand what constitutes negligence in liability insurance. Four elements must be present for an action to be considered negligent: duty, breach, causation, and damages. Commitment refers to the responsibility one party owes to another. The breach is a violation of that duty.
Causation connects the party’s action or inaction to the damage that occurred. Lastly, damages refer to the losses incurred due to the negligent action. The action is typically considered negligent if all these elements are present, and liability insurance can provide coverage.
Examples Of Negligence
Countless examples of negligence might lead to a claim against a business. For instance, if a retail store fails to promptly clean up a spill, causing a customer to slip and fall, this could be deemed negligent. Similarly, if a restaurant serves food that has not been correctly stored, leading to food poisoning, this, too, could be considered an act of negligence.
Limits Of Coverage For Negligence
While General Liability Insurance does provide coverage for negligence, it’s important to note that there are limits to this coverage. Each policy has a maximum limit that the insurance company will pay for a single claim and a maximum limit for the policy term. Businesses should consider these limits when purchasing a policy to ensure they have adequate coverage.
Negligence Versus Intentional Harm
Although general liability insurance covers negligence, it doesn’t cover intentional harm or illegal acts. For instance, the business’s public liability insurance wouldn’t cover any resulting lawsuits if an employee deliberately harms a customer. It is essential to understand this distinction when considering the protections offered by your liability insurance policy.
In conclusion, General Liability Insurance is a crucial safeguard for businesses against the financial implications of accidents, unexpected incidents, and negligence claims. It is a protective shield, covering legal costs and potential settlements arising from third-party bodily injuries, property damage, or reputational harm.
General Liability Insurance covers negligence, providing a crucial line of financial defense for businesses against claims of carelessness leading to third-party bodily injuries, property damage, or harm to reputation. However, it’s essential to remember that this coverage is not unlimited and doesn’t include intentional harm, illegal acts, or specific other exclusions.
Toth Felty Insurance can help you navigate the complexities of General Liability Insurance and find the right coverage for your business. Contact us today for a personalized consultation to ensure your business is fully protected from potential liabilities.