Business Liability and You – Things You Should Know

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Legal Reform Now predicts that over 15 million lawsuits in the United States will be filed this year. This is roughly 1 lawsuit for every 20 Americans. It is a massive understatement to say that we live in a litigious nation, where companies view consumers as potential plaintiffs and consumers as “deep pockets”. Despite being ridiculous on the surface, lawsuits are filed for issues that often end in victory for the plaintiffs (remember the lady who drank McDonald’s coffee). What does this mean for you? This means that your chances of your company having to face off against another person in court are high. Although not 100%, it is still a higher probability than most people would like. This means that you need to be aware of this fact and take precautions in the event your number goes up.

Show me the money!

The following statement does not cover all lawsuits that are filed in the United States each year. While there are some people out there trying to correct wrongs or punish evil, the majority of lawsuits are focused on money. What is the reason for this? It’s simple: Money can be transferred easily from one party to another to repair any injury, physical or otherwise.

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This is why you should approach any issue of liability as a financial matter and not as a moral one. I will be clear: It is not about right or wrong. This is about money. It would be great to leave court with your corporate image intact. This is why many settle out of court with nondisclosure clauses. However, the issue of image is collateral damage to your wallet.

Protect Yourself

Accidents happen, and no one is perfect. When they do, a lawsuit can arise. You are not completely protected just because your company name is Inc. or LLC. As long as the corporation is being charged, you are protected from personal liability. If it is you personally being accused, however, that is another matter. You should be aware of these things:

  • A loan will be personally guaranteed by you.
  • You have personally hurt someone.
  • Your actions or behavior were reckless or illegal.
  • It was not possible to run your business independently.

These events can happen and you are no better protected than a sole proprietorship or simple partnership. Liability insurance is the best way to protect yourself, other than having a great civil trial lawyer on retained.

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Liability Insurance, You

It protects your business and you from personal injury and property damage. This is the best way to describe liability insurance. It covers both damages awarded by courts and legal costs and fees. Liability insurance is available in a variety of forms. Each one can be tailored to meet your specific business needs. These policies cover professional, product, and general liability insurance.

  • General Liability. This coverage is also known by the name Commercial General Liability. This insurance protects against personal injury, property damage, and advertising claims.
  • Product Liability. This type of insurance is required if you sell or manufacture products. This insurance protects against injuries caused by your products and is usually determined by the product’s risk. Your liability and coverage requirements for sheets sales will be lower than those for firearms.
  • Professional Liability. Professional Liability Insurance covers errors and omissions that may occur in professional services provided by your company. This covers negligence, malpractice, and omissions. You might also need to have such a policy depending on what profession you are, like a doctor.
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Get Coverage

Once you’ve decided what kind of coverage you want, or what combination of coverage you need, it is time to decide how to get it. This type of insurance can be costly depending on the size and nature of your business. However, there are ways to reduce your costs.

Study Your Industry

Research the settlements, verdicts and legal actions that occurred in your industry over the past year. This will help you to determine the liability of your industry and what your own potential exposures may be. This information can be accessed locally, nationally, or regionally. However, more information will help you make better decisions.

Talk to Peers

What do your peers in the industry pay and what coverage is they getting for their money? Before you shop around, it is important to find out what the local rate is.

Locate a Broker

Although you may be an expert in your field of expertise, it is not enough to know the intricacies of insurance. You will need to seek the guidance and assistance from someone who has the knowledge and experience to find the best coverage for you and the most affordable rates.

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Shop Around.

Shopping around for coverage is important, regardless of whether you work with a broker or go it alone. Compare policies to determine what is included and excluded. You may also be able to find package deals if you require more than one type of insurance. This policy, also known as a Business Owner’s Policy (or simply “Business Owner’s Policy”), combines all types of insurance into one policy with a significantly lower premium.

Join

You should consider contacting your local trade association, national small business association, or area business group. Many times, these groups offer insurance benefits for members at group rates. This is a huge savings compared to individual company rates.

The Bottom Line

You could lose your business if you are convicted in court. Liability insurance can help prevent that. It is worth your time to find out more and make sure you have it in place for when you need it. This is a great investment for your business’ health and one of the best business decisions you can make.

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