Liability Is Your Biggest Exposure: Are You Covered?

Liability means obligation. Liability insurance protects you and your business from loss due to claims that others make against you. This type of insurance differs from property and casualty insurance, which protects you from damages to you or your business.

Liability claims arise when they are established, or determined, by a court of law. Again, this differs from property/casualty claims, which are determined directly by assessing the damage.

Liability stems from the responsibilities that people and businesses have to employees, customers and to the public in general.

Public Liability. Businesses and business owners come in contact with the public when they open their doors, conduct business and commerce and provide products and services. In doing so, businesses and professionals face potential liabilities stemming from legal obligations that, if neglected or broken, could require payment of monetary damages to another party. Some of these obligations come from:

• Ownership and maintenance of premises

• Conduct of the owner or employees at or away from the business premises

• Manufacture, distribution or sale of products

• Faulty construction, installation, service or repair work done by a company

• Liabilities assumed by contract, such as hold-harmless or indemnification clauses

Professional Liability. If you hold yourself to be an expert (professional) in your field and you offer advice and/or services based on your expertise, you could be exposed to claims that you caused harm due to misrepresentation, mistake, failure to use adequate care, etc.

Under the general heading of professional liability, insurers use two categories. The first is malpractice liability, which technically applies to professionals whose services include touching other people's bodies (such as doctors). The other category is errors and omissions (E&O) coverage, for professionals whose services usually do not involve touching bodies.

Professional liability insurance protects professionals from financial loss resulting from claims, including lawsuits, against them by their clients or others. For many of the recognized professions - publishing, accounting, tax, securities, engineering, construction - standard policies are designed

to fit the types of services provided.

Commercial General Liability (CGL) Policy. Although policies are available that provide coverage for specific types of public liability, most businesses gain coverage for a wide range of liability exposures through a commercial general liability policy (CGL). A CGL is a package of coverages that provides protection for most of a business' insurable liability exposure. Under the CGL, insurers agree to cover all sums up to the policy limits for which the policyholder is found legally liable for bodily injury or property damage arising from the premises, operations or products of the policyholder. The CGL policy does not cover liabilities provided for under workers' comp, unemployment insurance or disability benefits laws, and professional and personal liability also may be excluded.

Other common exclusions include:

• Damages resulting from release or escape of pollutants

• Damage to someone else's property in policyholder's care, custody or control

• Losses resulting from withdrawal, recall, repair, replacement or loss of use of any policyholder product already on the market

• Liability resulting from product's failure to do what it is intended to do

Liability is your greatest exposure risk. If you are found by a court of law to have caused harm due to negligence, incompetence, misrepresentation, fraud, etc., the verdict could be many millions of dollars. The odds of this happening are low, but it does happen and, if the spinning wheel happens to stop on your slot, you're wiped out.

Liability insurance covers legal expenses, court costs and, if legal liability is found, any sums up to the limits of the policy that the court awards. Get covered.