Sunday, April 19, 2009

Business Liability Insurance Protects You

Liability Insurance Protects You Against

Business Liability Insurance Protects You

For many small business owners, entrepreneurs, and sole proprietors, the decision of how to organize their business is based on protecting their personal assets and keeping them separate from the business. For some businesses, incorporating offers the first layer of protection. However, when the owner of the corporation is involved in the daily operations of the business, courts may lift the corporate veil of protection and find the owner personally responsible for the company’s legal liabilities.

Many business owners have found that business liability insurance offers protection for the various situations that may arise. Any individual providing an opinion, making recommendations, designing solutions or offering a service can transfer some of the risk associated with those activities with a liability policy. Four types of liability coverage make up the majority of business liability policies:

1. Professional Liability Insurance, also known as Errors and Omissions

2. Workers' Compensation Insurance

3. Business Liability Insurance Package Policy

4. Umbrella Liability Insurance

Professional Liability insurance or errors and omissions insurance (E&O) protects the company and owner in the event a client accuses you of causing a financial loss as a result of an error or an omission committed in the delivery of professional services.

Most states require employers to carry workers’ compensation insurance. This coverage provides medical and disability benefits to employees in the event of a work related injury or illness. Workers' compensation policies contain an employers' liability portion that protects the organization in the event an employee files suit claiming the company's negligence caused a work related illness or injury.

General business liability insurance protects a company in the event a client is injured on the company’s premises, an employee injures someone, or an employee damages property at a client's location. General liability coverage on a business liability insurance policy also meets a business that rents or leases property’s landlord's requirement for business premises liability insurance. General liability insurance is often also referred to as a business owner’s policy.

Umbrella liability policies provide coverage for claims that exceed the amount of coverage on your other liability policies. These policies include general liability, commercial auto coverage and the employers' liability coverage on your workers' compensation policy. Umbrella business liability insurance coverage is triggered when claims exceed the underlying primary insurance.

Liability Insurance or Personal Umbrella Liability Policy

Liability Insurance Protects You Against

Liability Insurance or Personal Umbrella Liability Policy

Often called an umbrella because it is carried over all other liability insurance and is used for a catastrophic loss when primary liability insurance is exhausted. This policy adds $1,000,000 ($2,000,000 to $10,000,000 available) extra coverage to your personal liability and automobile liability policies. Coverage is provided for you, your spouse and any relatives living in your household and insured by your primary policies.

This policy is designed to cover catastrophic situations where a legal award could exceed the limits of you primary liability insurance. This policy also included coverage if you are sued for false imprisonment, wrongful eviction, libel, slander, defamation of character or invasion of privacy.

There are many factors to consider when calculation a premium: the state in which you live, the number of liability exposures you have (cars, drivers) etc. Usually the best rates occur when the customer insures both auto and home with the same insurance company and the personal umbrella liability policy. This is a requirement for many insurers offering umbrella coverage.

Professional Liability Insurance

Liability Insurance Protects You Against

Professional Liability Insurance

What Is Professional Liability Insurance?

Whether your company employs hundreds of consultants or you work out of a home office, if you make your money providing IT services, you need Professional Liability insurance.

Also known as Errors and Omissions insurance, Professional Liability insurance is your most critical coverage. Professional Liability insurance protects you and your business from potentially catastrophic litigation caused by charges of professional negligence or failure to perform your professional duties. This might include errors and omissions resulting in loss of client data, software or system failure, claims of non-performance, or negligent oversell.

If you are a subcontractor working on a client site, your client may require that you provide proof of General Liability and Professional Liability insurance.

Professional Liability insurance may be described in your contract in this way: "Contractor will maintain at its expense: Professional Liability insurance in the amount of $1,000,000 including coverage for errors and omissions caused by Contractor's negligence in the performance of its duties under this agreement."

Why Do I Need Professional Liability Insurance?

Your business provides a highly specialized service that many of your clients don't fully understand. At the same time, the projects you work on are highly sensitive and critically important to your client's business. But you’re only human. If your errors and omissions result in loss of client data or a software or system failure, or if you fail to perform your duties, your client may be left unable to operate its business. This risk opens you up to litigation. That’s where Professional Liability insurance comes in.

For example, if your work damages a company's client database, the cost to reconstruct that database may exceed typical costs for replacing hardware and software. In fact, some client companies have won extremely large settlements when subcontractors have lost irreplaceable data. Professional Liability insurance would cover such costs, within policy limits.

If you develop software as a professional independent contractor, copyright ownership may be a murky issue, and much depends on the terms of contract. If you design Web sites and software, or you work with or "fix" previously purchased software for clients, you are at risk for copyright infringement and/or charges of misappropriating trade secrets. If you should be accused of such charges, Professional Liability insurance would cover the cost of your legal defense.

You may think your General Liability insurance policy covers such instances, but that’s not the case. General Liability insurance covers claims of bodily injury and property damage only, and typically excludes coverage for claims related to the delivery of professional services. For example, if you damage a computer, which might fall under General Liability insurance coverage, you may simply be responsible for the cost of replacing it. But the cost of your company's professional errors, omissions and negligence is usually far greater than the costs covered by your General Liability policy.

Whether a claim is baseless or not, mounting a legal defense can bankrupt your company. Professional Liability insurance protects your company and your future by responding to professional liability claims and helping you keep your business operating as potential lawsuits move through the courts. Without Professional Liability insurance, your company could be financially overwhelmed.

Because laws and legal precedents governing the relatively new technology industry are still being developed, computer professionals are often in legally uncharted territory. That makes Professional Liability insurance even more critical to your company’s long-term survival, as you may find yourself being sued tomorrow for actions that are completely in line with today’s consulting expectations. Because professional requirements and duties are largely undefined in legal terms, Professional Liability insurance protects you against the unknown and the unforeseeable.

Claims Scenarios Covered by Professional Liability Insurance

Below are some actual scenarios in which technology companies have faced litigation. In such scenarios, Professional Liability insurance can pay for a strong legal defense and save a small business from bankruptcy. You may face similar professional liability risks every day:

1. A software design error causes an MRI machine to be rendered inoperable, allegedly causing loss of profit to the hospital.

2. A client contracts with a software consultant to develop a software system. The contract contains specific benchmarks for speed and other requirements. These benchmarks are not reached, allegedly as a result of the consultant’s negligence. The consultant is sued for loss of profit due to negligence, breach of contract, and negligent misrepresentation.

3. A plaintiff purchases from a telecommunications specialist a piece of hardware: a digital telecommunications switch. The contract also calls for the specialist to connect the switch to the purchaser’s networked computer system, and to provide maintenance. Several months after installation, the switch fails, causing the purchaser significant downtime. The customer sues, alleging lost revenue and loss of reputation. The question arises as to whether the failure was due to faulty design or manufacture of the switch, or due to the failure of the specialist to adequately connect the switch to the network or to provide proper maintenance services.

4. While transferring data from a legacy to Web-based system, a database is compromised, resulting in the loss of valuable corporate sales information.

5. A software developer is sued when, during the execution of a contract to build an Internet application for a company, the developer is allegedly negligent in the staffing of the project, which resulted in an alleged breach of contract.

What To Look for in a Professional Liability Insurance Policy

Be sure your Professional Liability policy includes the following key features:

1. Coverage that includes legal defense costs. Professional Liability insurance should pay for any resulting judgments against you, including court costs up to your policy’s coverage limits.

2. Coverage that extends to both W2 employees and 1099 subcontractors. Professional Liability insurance should protect your company from claims resulting from the work done by 1099 subcontractors on your behalf. However, 1099 personnel need their own errors and omissions insurance because your Professional Liability insurance policy may not defend them if they are sued separately or in addition to you.

3. Optional coverage for allegations of copyright infringement and intellectual property infringement. As part of your Professional Liability insurance policy, intellectual property infringement coverage protects you against claims alleging copyright infringement. Software, systems or processes are some of the most commonly known "intellectual properties."

4. Personal injury coverage. Having personal injury coverage as part of your Professional Liability insurance policy protects you against claims of libel, slander and invasion of privacy.

5. Worldwide coverage if the suit is brought in the United States. Be sure to ask if your Professional Liability insurance covers such litigation.

Business Insurance Basics

Liability Insurance Protects You Against

Business Insurance Basics

The most common types of insurance for technology businesses at a glance

Every business needs insurance to protect against potential loss or damage. Because of the nature of IT consulting and computer-related businesses, there are distinct added risks and vulnerabilities that can be addressed through specialized insurance policies. Here is a brief overview of the insurance available to safeguard your company - and satisfy your clients; you'll find more information on each of the corresponding coverage pages.

Business Insurance Basics: Business Liability Insurance

Commercial General Liability (CGL) policies cover four types of claims: bodily injury resulting in actual physical damage or loss; property damage or loss; personal injury (including slander or libel); and advertising injury. Often, it is offered in a package with Property coverage at very competitive rates.

Commercial liability insurance is not expensive but the cost to defend a claim can be catastrophic. One benefit of carrying general liability insurance is that for covered claims, all damages, legal defense fees and settlement charges are paid by the insurer up to the limits of the policy.

Your TechInsurance agent can provide you with recommended coverages and limits for your business liability insurance. He or she can also discuss with you optional coverages, or endorsements, you might wish to purchase for added protection against certain risks. If necessary, an Umbrella Liability policy can be purchased separately to extend coverage well above the limits of your standard commercial general liability policy.

Business Insurance Basics: Property Coverage

Property insurance protects your business property against physical loss or damage by theft, fire or other means. Because every business has property that could become lost or damaged, this form of business insurance is one of the first things you should buy when you start a company.

Property coverage can be structured several ways. In the most basic business insurance policies, Property coverage protects your furniture, computers, office equipment and other materials.

For many businesses, the most basic Property coverage is not enough. You may need a policy that insures data, papers, records, money and securities kept at your place of business. Sometimes this coverage is included in a basic Property policy (it may be listed as Valuable Papers or Media and Extra Expense coverage); if not, it can usually be purchased as an extra endorsement to your standard policy.

Business Insurance Basics: Package Policies (BOP)

Package Policies combine General Liability and Property Insurance. When you evaluate business insurance, consider a package policy such as a Business Owner's Policy (BOP). A BOP combines Property coverage and General Liability insurance in a single business insurance policy. If eligible, you may find that you can get better business coverage at lower rates than you would get from two separate policies.

Keep in mind that Business Owners Policy packages are especially designed for small- to medium-sized businesses operating in a low-risk business class. The BOP includes Commercial General Liability insurance and Property insurance for physical assets, such as office furniture and computers. The package policy may also cover loss of business income and extra expense.

A BOP generally insures lost or damaged property for replacement value, which means that you would receive enough from your settlement to replace the property at today's market value. The Property portion of a BOP may also cover other people's personal property in your "care, custody, and control" to the extent it would be covered under a standard Property policy.

The Liability coverage of a BOP is comparable to a typical Commercial General Liability (CGL) policy, providing protection against claims of bodily injury or property damage. The Liability portion also covers the cost of defending lawsuits that claim you are responsible for causing bodily injury or property damage.

(Note: BOP Liability does not protect against professional errors or negligence normally covered by Professional Liability business insurance.)

Business Insurance Basics: Workers' Compensation Insurance

Workers' Compensation Insurance provides medical and disability coverage for on-the-job injuries or work-related illness. It is required by regulation in most states when you have W2 employees. In many states principals such as owners, officers and partners can exclude themselves from workers' compensation coverage.

Worker's Compensation policies also typically include Employer's Liability coverage, which protects the company should an employee allege that the employer's negligence or failure to provide a safe workplace was the cause of his/her injury or illness.

Business Insurance Basics: Professional Liability / Errors and Omissions (E&O) Insurance

Professional Liability / Errors and Omissions insurance covers crucial aspects of your business and your interactions with your clients. It protects technology companies if they are faced with the two most common forms of liability risks:

1. Claims for "malpractice" in which companies are sued for failing to maintain accepted standards of care as a technology professional or company, and

2. Breach of contract claims for failing to perform contracted services in a timely manner and within the contractual terms.

Professional liability coverage protects you against potentially catastrophic litigation involving professional negligence - charges of failing to perform professional duties. These might include loss of client data; software or system failure; claims of nonperformance; or negligent oversell.

Massive software giants, multinational hardware producers, and individuals writing programs or servicing computers out of their homes are all equally at risk for professional / E&O liability suits. Essentially, if you make your money providing IT services, you should have Professional Liability / E&O insurance. This insurance protects your company and your future by responding to professional liability claims and helping you keep your business operating while potential lawsuits move through the courts.

Business Insurance Basics: Commercial Automobile Insurance

Hired Auto and Non-Owned Auto coverage is typically added as an endorsement on a General Liability policy. When there are no vehicles titled in the company name, this coverage usually meets your client's contract requirement for Commercial Auto coverage.

Hired Auto coverage replaces or augments the liability coverage offered by auto rental agencies. However, it does not cover physical damage to the vehicle that is rented. You should still obtain physical damage coverage from the rental agency. In addition, liability coverage provided by your Hired Auto coverage is designed to protect your company, not the employee driving the rented vehicle. The employee is still personally liable for injuries or property damage to third parties in an accident.

Non-Owned Auto coverage protects your company in the event that your company is sued as a result of an auto accident that you or one of your employees has in a personal vehicle while on company business and the personal insurance maintained by the driver is inadequate to pay the claim.

Business Insurance Basics: Employment Practices Liability Insurance (EPLI)

Employment Practices Liability Insurance (EPLI), typically covers allegations of discrimination, wrongful termination and sexual harassment of employees. Employment Practices Liability Insurance also may be bundled with Directors and Officers liability insurance, which protects against claims that allege misconduct by the officers of a company against individuals or groups affected by the directors' actions.

EPLI protects companies against claims that past, current and prospective employees of the company bring against the company, its directors and officers, and its other employees. Common employment practices violations include discrimination (based on sex, age, race, religion or other factors); sexual harassment (including "quid pro quo" harassment claims); wrongful termination; and a variety of other employment-related claims that violate employees' civil rights or their ability to perform their jobs in an acceptable and fair working environment.

Business Insurance Basics: Umbrella Liability / Excess Liability Insurance

Umbrella Liability (also known as Excess Liability) provides additional coverage when the limits of insurance on an underlying policy are exceeded. For instance, if a claim is settled for $1,500,000, but your General Liability policy has a $1,000,000 coverage limit, the umbrella policy would pick up the additional amount.

Umbrella Liability policies add coverage to General Liability, Hired and Non-Owned Auto Liability, and Employer's Liability for a single premium. Umbrella coverage does not apply to the Professional Liability policy.

Liability Insurance Protects You Against

Liability Insurance Protects You Against

Liability Insurance Protects You Against

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A Liability Insurance Policy Protects Against Accidents

Liability Insurance Protects You Against

A Liability Insurance Policy Protects Against Accidents

Liability insurance protects your company in case it is sued or held legally liable for injury or loss caused by a mistake made by your company. The development of your risk management plan as part of your business insurance plan will limit the risk of error; however, that risk cannot be eliminated. Liability insurance covers the business for this risk.

For small businesses, many insurers package liability insurance into a larger insurance policy including property and casualty insurance. Most insurers call this packaged policy the “business owners’ policy” or BOP. Your business may be better served by a separate commercial general liability policy or CGL. The coverage afforded under both types of policies are almost always the same.

There are two types of liability policy:

1. Claims Made – The insurer that covers your business when the claim is made is the insurer that will cover the claim. If you are a construction or design professional, this is the most likely liability policy choice because it can be years after the completion of a project for a defect to become apparent.

2. Occurrence – The insurer that insures you at the time of the occurrence is the insurer that will handle the claim. The insurer is obligated to work with you until the claim is resolved even if you do not renew your policy with the insurer. These liability policies are more prevalent for businesses that would typically be aware of a potential claim immediately.

The two types of policies are the same with the exception of when the insurer’s obligation starts and ends.

The liability policy provides coverage for damage from an “occurrence” during the policy period. An “occurrence” generally means “accident” occurring to a third-party (someone other than you or the insurer). However, your liability policy may include a definition of “occurrence” to include “continuous or repeated exposure to substantially the same harmful conditions” that includes coverage for injury to a third-party for those kinds of injuries that cause damage over time. An example could be a gravel pit where a neighboring homeowner becomes ill due to a constant inhalation of gravel dust from the pit.

What is Not Covered

What is covered under your liability policy is a function of the substantive state law of your state. One state's courts may rule that a liability policy covers a particular occurrence, while a neighboring state rules it does not. There are some types of occurrences that are not covered and are excluded from the definition of occurrence across all liability policies:

1. Injury to a Worker- Workers are covered by workers’ compensation insurance and workers are not “third-parties” and, therefore, worker injury is not covered.

2. Automobile Liability – Damage or loss caused by a company vehicle is covered by a commercial auto policy specifically sold separately from the liability policy.

3. Damage to Business Property – Damage to business property or location is covered by your property and casualty insurance and your business is the “first-party” and liability coverage only applies to third-party claims.

4. Pollution – Most liability policies do not cover pollution. If your business will or can harm the environment, then you will need a separate policy or a pollution endorsement.

5. Products Completed Coverage – Liability policies do cover loss or damage caused by a completed product or service in most cases as long as there is a products-completed operations clause in the policy. Liability policies do not cover loss or damage due to the costs associated with the removal of a product or a recall of the product. There is separate coverage for that situation called product withdrawal coverage.

Understanding Limits

There are two types of limits in a standard liability policy:

1. Single Occurrence Limit – This is the limit the insurer will pay on one occurrence.

2. Aggregate Limit – This is the maximum amount the insurer will pay during any policy period for all of the occurrences in the policy period. Generally, this is two times the single occurrence limit.

Insurers have two duties in the event of a claim. The insurer has a duty to defend your company and a duty to indemnify. Indemnify means to pay the claimed loss. The duty to defend your company is the duty of the insurer to pay for your legal representation and all associated costs.

The limits in your policy may be inclusive of defense costs or defense costs may be outside of limits. You want to have a clear understanding of how your policy works. If you have a $500,000 single limit and that amount is to include defense costs, then your limit could be substantially reduced by the costs and fees associated with your defense.

Keep in mind that your aggregate limit is your total amount of insurance for the policy period. You will want this number to be a realistic reflection of your company's exposure to risk.

Endorsements and Exclusions

Endorsements add coverage to your policy and exclusions take away or limit coverage under your liability policy. We will address various types of exclusions and endorsements applicable to the liability policy. Here, we will briefly list the most common types of endorsements:

1. Liquor Liability-This is an endorsement to your liability policy adding coverage if your business sells, serves, produces, distributes or facilitates the delivery of alcohol to the public.

2. Employment Practices -As the population ages and as our workplace becomes more diverse, claims against employers alleging discrimination are increasing. This endorsement adds coverage for such claims subject to a number of limitations.

3. Employee Benefits - If you or an employee will manage employee benefits such as health, 401k's or pensions, then this endorsement will add coverage to protect you against claims of faulty administration or negligence.

Liability Insurance is a critical element of your business insurance plan and it can be complicated. Choosing a good insurance professional and creating a statement about what your business does so you can work with that professional to understand your options is important in making sure your liability insurance is an adequate part of your business insurance plan.

liability insurance protects you against

Liability Insurance Protects You Against

liability insurance protects you against

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What is Liability Insurance?

Liability Insurance Protects You Against

What is Liability Insurance?

There are many different types of insurance policies available, but liability insurance is one of the most popular because it costs much less than many other options. For example, in regard to auto insurance policies, liability insurance costs far less than full coverage. The reason for this is because full coverage insurance must pay for both your vehicle and any other vehicle involved in a collision, as well as property damage and medical expenses due to injuries to you or another party.

On the other hand, liability insurance is only responsible for the other party's losses. Your person and your property are unprotected, but liability insurance protects you from being held responsible for the other party's damages.

There are different types of liability insurance, including general liability, which works in much the same way as auto liability insurance, but covers businesses. General liability protects a company from third party claims. Aside from general liability, there is also D & O liability, employer liability, and professional liability insurance.

D & O liability stands for "directors and officers" liability and is intended to cover the acts or omissions of those in the director or officer position. An entire company should not be held liable for the statements, actions, failure to act, or other mistakes that are the responsibility of an officer or director.

Employer liability is also known as worker's comp, and it is a mandatory form of liability insurance coverage that all businesses must carry. While it sounds like it is intended to protect the employee, which it does to some degree, it is actually protection for the employer in case of injury, job related illness, or other damages for which the employee might sue the company.

Professional liability is similar to malpractice insurance, although the coverage may not be as comprehensive as some malpractice policies in different fields. The purpose for professional liability insurance is to protect those seen as professionals or "experts" in a given field, who may not be protected by general liability due to their expertise. When one is seen as a professional, he is held to a higher standard and is therefore often considered to hold greater liability towards his clients. Consequently, he needs more coverage than general liability insurance offers.

The simplest definition of liability insurance is insurance which protects a person or entity from claims initiated by another party.

New: Discuss this Article

Posted by: anon23594
Mrs. M was shopping in the X Department store, and a salesgirl accidentally stepped upon her foot, breaking the skin. The customer did not believe the accident to be serious and shortly after left for a vacation. Before her return, blood poisoning developed. The woman brought suit, and her attorney contended the store to be liable on the ground of negligence. What is your opinion?

Posted by: anon9646
Legally, if you run into the back of the car in front of you, even if they stopped unexpectedly, you are still at fault, for failing to follow at safe distance. This I know for I was charged with the same, when the car in front of me came to a dead halt on the interstate, for no discernible reason. I ran into the back of that car, and the cop was ever so nice, but said he would have to charge me!

Posted by: anon5396
I want personal liability insurance that covers me. Not my vehicle. I want it to protect me from liability no matter what I am driving. I have 12 motor scooters, all antiques. Several of them get ridden two or three time a year. None of them are ridden more that 50 miles in a year, and only one even comes close to that. This is a collection, not a fleet. I have never had a scooter accident, but stranger things have happened. Obviously, I can't buy a policy for each of these scooters. I don't need collision insurance, just liability on myself.

Posted by: anon3574

I was in a car accident recently where a drunk man ran onto the road, the car in front of me stopped abruptly and then I ran into the back of that car, having braked, but not fast enough.

Do I still have to pay the cost of damage to the other car? I genuinely believe that the car accident is not my fault.

Please help, I can't afford this right now!!!