Why do I need Liability Insurance?
Insurance is a necessary business expense but it can be daunting, especially if you are unfamiliar with the type of insurance you need. Many entrepreneurs may not realize the importance of liability coverage, which is vital to maintain the health of your business - just as a proper diet and exercise are important for your personal health!
A lawsuit, whether well-founded or not, can result in costly legal fees. You put a great deal of effort, time and money into building your business and the last thing you want is to lose it all because you didn’t have the proper insurance protection in place.
So, what types of insurance does your business need?
Liability insurance
Liability insurance can be tailored to meet the needs of all types of businesses and professions and it’s designed to protect your business against potential lawsuits and provide peace of mind in the event of a costly liability situation.
Commercial General Liability
Commercial general liability insurance protects you and your business by providing coverage against claims for:
- bodily or personal injuries;
- advertising liability;
- property damage to third parties, caused by your operations, products or employees.
If you are sued, this insurance covers legal costs to defend the claim against your business in court, as well as indemnity costs to cover damages to compensate third parties.
Here are a few examples to illustrate why Commercial General Liability coverage is important:
- If you or your contractor damage a customer’s car when removing snow from your parking lot.
- You accidentally hit an electrical line during a digging operation.
- A patient gets bitten in the waiting room of your veterinary clinic.
- Someone slips and falls (customer or delivery person), or trips on your premises.
- Your workmanship is not satisfactory to your client or it causes damage.
- Your advertising banner at a trade show falls and injures someone.
Professional Liability
As a professional, if you fail to meet one of your responsibilities or a requirement of your profession, this could have serious consequences, including jeopardizing the financial stability of your business and your personal assets.
Professional Liability insurance, also known as Errors and Omissions insurance, covers you for any negligence, errors and omissions incurred, while providing your client with your professional services. If a suit is presented for damages covered by your insurance policy, this protection covers legal fees for your defence, whether or not you are liable.
Here are a few reasons to illustrate why Professional Liability coverage is important:
1) Project delays: Professionals often work to tight deadlines. Missing these deadlines can cause problems if the project has a critical launch date. For example, changes in scope; key contractors or team members leaving mid-project, and other unanticipated changes can slow down the pace of a project. If the client has a set launch date, missing that deadline could cost the client thousands of dollars in wasted marketing campaigns. In turn, the client could refuse to pay the final invoice or hold you responsible for the expense of hiring new contractors to complete the project.
2) Unpaid invoices: A client may fail or refuse to pay an invoice for many reasons. What could go wrong when a professional decides to take legal action against a late-paying client? In many cases, a client may respond by filing a lawsuit for negligence or other claims if they feel justified in withholding payment. Such claims, even if untrue, could damage a business.
3) Unintentional breach of contract: Breach of contract can take many forms. It could be something as simple as failing to deliver a project on time or not meeting the client’s expectations. Any breach of contract may entitle the client to make a claim against the designer.
4) Copyright infringement: Claims of copyright infringement can happen to well-established companies. For example, your company designs a new logo for a client and another company (which may not even be a direct competitor), claims an element of the logo is too similar to its logo, so it starts a legal dispute with your client.
Professional Liability insurance provides coverage against copyright infringement, trademarks, slogans, and domain names.
5) Breakdown of the client relationship: Breakdowns in the client relationship are a common catalyst for professional liability claims. Despite the best efforts to make a project run smoothly, sometimes a client relationship is just not working. Whether there are constant changes to the project or poor compensation, a professional might find the stress of the project is too much and decide to walk away. Unfortunately, “firing” a bad client can backfire. For example, the client might demand reimbursement for the money already paid. They may also claim damages for the loss of income due to the delayed project launch, or compensation for hiring other contractors to complete the project.
Insurance that fits
Liability Insurance is like an umbrella that protects you and your business, and it can be tailored to meet your unique needs.
If you would like more information, or if you would like to discuss your commercial insurance options, please give me a call.
Karen Keeling, CRM, CAIB, RIBO
Commercial Insurance Specialist
Brokerlink
519-841-0472
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P.S. Be sure to ask me about cyber coverage - cyber attacks are on the rise and may even affect your home office location!