Overview of liability insurance coverage

Employers know that good insurance coverage is an important part of protecting their companies from unexpected liabilities. Making sure that an insurance policy provides the necessary coverage can be confusing and stressful. Approximately 30 percent of small business owners rated liability insurance as their second largest insurance concern, according to a 2004 survey by the National Federation of Independent Business. The following discussion provides a brief overview of types of coverage offered to businesses through commercial general liability insurance, or CGL.

For businesses that wish to protect against losses, CGL insurance is a low cost method to protect the valuable investment made in a business.

CGL insurance can provide coverage for events that fall under one of the following four categories:

  • Bodily injury
  • Personal injury
  • Damage to others property
  • False advertising

If an event happens that falls into any of the categories above, CGL coverage often compensates a covered business for the losses incurred as a result. For example, CGL insurance will cover medical expenses incurred by a person who is injured while on the premises of a business. However, this does not apply to employees who are injured on the premises, because workers' compensation insurance normally covers claims made by employees.

In addition, if a business is sued, CGL can cover certain types of damages and legal fees that may be awarded to the Plaintiff. For example, CGL will pay for compensatory damages, general damages and punitive damages that a business is found liable for.

Compensatory damages are awarded to cover the current and future financial losses suffered as a result of a person's injury. General damages are awarded to compensate a victim for non-financial losses, such as pain and suffering or mental anguish. Additional liability may also be imposed under the category of punitive damages if a business is found to have acted in an egregious manner.

What liability insurance does not protect against

Although CGL provides important protection for liability, there are several things that CGL insurance typically will not protect against. For example, car or truck accidents in employer-owned vehicles are generally not covered. An employer who desires this type of coverage will need to purchase additional automobile coverage.

In addition, claims against professionals in certain occupations are also not covered by CGL insurance. Individuals who provide professional services, such as doctors or lawyers, often purchase professional liability or malpractice insurance. This insurance is sometimes called errors and omissions insurance because it covers errors in providing service or failure to provide service.

Additionally, the following claims are also excluded from CGL coverage:

  • Sexual harassment
  • Wrongful termination
  • Failure to hire or promote
  • Race or gender discrimination

These claims are usually covered by employment practices liability coverage policies. This type of insurance also covers any legal costs incurred from defending any related lawsuits.

Insurance disputes can be extremely costly. Often, discussing the policy with an attorney can help a person understand what events are covered and what events are excluded from an insurance policy. If you need help preventing insurance coverage disputes or assistance resolving a current dispute, contact an experience insurance coverage litigation lawyer.