Without commercial general liability (CGL) insurance, you’d have to pay for claims out of pocket. Fortunately, a general liability insurance policy can mitigate those expenses when they arise. However, when evaluating premiums and even determining insurability, insurers will consider a number of factors, including your claim history, so it is in your interest to do your best to reduce risk and avoid as many accidents as possible.
As its name implies, there are many types of incidents that can lead to a general liability claim. Its coverage is by design broad and general.
Type of Claim | What It Is | How to Avoid It |
|---|---|---|
Slip & Fall | When a third party falls on the business premise | Mark risky areas clearly, and proactively clean up wet areas |
Third-party Property Damage | When a non-employee’s property is damaged | Practice situational awareness |
Personal & Advertising Injury | Allegations of reputational harm by your business | Be mindful of what you say or post on social media |
Products-completed Operations | Defect or issue with a product made or distributed by your business | Practice strict quality control |
Liquor Liability | Injury or property damage from over-intoxicated customers | Utilize training programs like TIPS for your servers |
Let’s take a closer look at these five common examples of general liability claims and the ways to avoid them.
1. Slip & Fall Claims
By far one of the most common types of claims for a small business is a slip-and-fall. Falls accounted for 25% of all preventable injury-related deaths in 2021 that were not work or automobile accident-related. Additionally, according to the National Safety Council (NSC), 43,800 people suffered a fatal fall, making it the second leading cause of preventable deaths. While not all of these take place in a business, the statistic shows the frighteningly high chance of a fatal slip and fall happening at your business.
An example of a slip-and-fall might be when a patron walks around your business establishment and slips on a wet (or otherwise slippery) floor, then falls and sustains injuries requiring medical attention.
How to Avoid Slip & Fall Claims
Insurers take slip-and-fall claims so seriously that many actually provide slip-and-fall claim kits. These help your business reduce the risk of a claim and the cost of one through timely and appropriate response if someone falls. Slip-and-fall claims often fall under the premises liability coverage in general liability insurance.
Communication is a key to avoiding slip-and-fall claims. Ensure that people are aware of any hazards by using cones and signs that indicate a wet floor to redirect people to a path that is safely away from hazards. Advise workers to be aware of incidents that may cause a slippery floor and to act quickly to mitigate any problems. Take further steps by installing non-slip floor rug pads or tape to reduce the chance of slipping in high-traffic areas.
2. Third-party Property Damage Claims
Third-party property damage claims happen when your business activity leads to the accidental damage of someone else’s personal property. For instance, imagine a contractor is moving a wheelbarrow across a client’s driveway. Then, they lose control, and the wheelbarrow collides with the client’s car, creating a big dent. Or, while doing a photo shoot for a museum, a photographer’s tripod falls over and breaks an expensive, antique vase. In each situation, the insured could file a claim for property damage under their CGL.
How to Avoid Third-party Property Damage Claims
You can avoid property damage claims by being aware of your surroundings when working around client property. See to it that there is enough space to work without putting client property at risk. Be intentional about the actions you take, and think through any unintended consequences before starting the job.
If your clients come into your place of business, ensure they keep their belongings with them at all times. If they must leave their belongings, give them access to a locker or other safe area where they can store them.
3. Personal & Advertising Injury Claims
Personal injury and advertising claims arise when someone’s reputation is harmed through your actions, usually by what you say or print in advertising. A common example is a business making a public claim, perhaps on social media, that your competitor is a “crook.” Your competitor may sue you because their reputation is damaged and they are losing business.
These claims can also come about in a roundabout way: if an employee is disparaging a customer or a competitor, and it gets back to the subject, they could turn around and file a claim or suit.
Most CGL policies contain personal and advertising injury coverage. It can be purchased as a standalone policy, too.
How to Avoid Personal & Advertising Injury Claims
Avoiding personal and advertising injury claims is easy if you are mindful of what you and your employees say. While it’s OK to compare factual statements between you and your competitors, avoid calling competitors names or making disparaging claims about them. When in doubt, don’t say anything at all.
Today, it is important to ensure your employees have thorough training in how to speak to customers and what to post or not post online about the business. Train them on appropriate ways to talk about competitors.
4. Products-completed Operations Claims
When a defect in a completed product or some other problem with the product leads to property damage or injury, products-completed operations coverage kicks in. This won’t, however, protect a business from recalls of items.
Food poisoning claims fall under the products-completed operations coverage. For example, in Connecticut, a catered work lunch that caused food poisoning led to an about $370,000 liability settlement for sick employees. This may be why product liability coverage has one of the highest average settlement amounts.
How to Avoid Products-completed Operations Claims
To avoid products-completed operations claims, set a high standard of excellence for all products. Quality assurance is important: properly test products for safety issues and always take feedback from customers seriously. Someone might point something out to you without a claim being filed, and this can be an invaluable insight into a danger that you didn’t see.
5. Liquor Liability Claims
If you do not manufacture, produce, sell, or distribute alcohol, your general liability policy will offer incidental coverage for claims related to liquor. If your business does manufacture, produce, distribute, or sell alcohol, liquor liability insurance is often available as an endorsement for a CGL.
A claim could result from an afternoon happy hour that you host for your employees as a way to celebrate hitting sales goals. If one of your employees drinks too much and then hurts someone while driving home, you could be held liable.
How to Avoid Liquor Liability Claims
You probably want to see to it that alcohol is not allowed at company events or on company property. If you do decide to host an event with alcohol, ensure you keep tabs on who might be drinking too much. Consider limiting drinks to two per employee by using a token system for employees to “purchase” a drink. You may also want to offer to book ridesharing so that no one drives under the influence.
What Your General Liability Insurer Pays for in a Claim
When your general liability insurance policy pays a claim, it is paying for the amount of loss to the other party and any legal and investigation costs you might incur from the claim. For instance, if a person files a slip-and-fall claim for $30,000 in medical bills and lost wages, your policy would pay that amount—unless you suspected fraud, in which case an investigation might be conducted by the insurance carrier to prevent paying a fraudulent claim.
The total amount available and the amount paid out per claim are dictated by the structure of the policy. Most general liability policies will come with a limit of $1 million per occurrence and $2 million aggregate. This means the policy has a total of $2 million per policy term available and will pay out a maximum of $1 million per occurrence (think, claim).
Depending on your policy, the legal and investigation fees paid might be part of your aggregate sum paid by the insurance carrier. This can quickly eat up policy payout caps if you only have $100,000 in liability coverage. Review how your carrier calculates the claim value toward your per-occurrence and aggregate total to fully understand if you have enough liability coverage.
Claims Your General Liability Insurance Won’t Cover
Remember that while general liability covers third-party claims, there are incidents that general liability won’t cover. These include:
- Professional liability claims: Damages resulting from a professional error in your work or workmanship are covered by errors and omissions insurance.
- Workers’ compensation claims: When employees are injured at work, they are covered by workers’ compensation insurance as required by state law.
- Commercial auto claims: When you are in an accident while working, your commercial auto insurance policy covers the liabilities.
Frequently Asked Questions (FAQs)
Claims can involve lawsuits, and lawsuits can involve claims, but the ultimate difference is how the settlement is reached and how many parties are involved. A claim can be filed by a business or a third party because of a loss suffered due to business operations. It may be investigated with liability denied or accepted and a settlement reached between the insurer and the claimant. If an agreement cannot be reached, then the claimant (or their representative) may file a suit.
No, general liability primarily covers bodily injury and property damage claims. The loss of something less tangible, like failure to deliver a service, falls under a professional liability policy.
Costs for general liability vary significantly depending on factors such as the industry, claims history, size, and revenue of the business. A photographer may pay $200 to $800 annually for general liability, while a landscaper could spend $900 to $2,000 annually.
The best way to save money on your general liability policy is to run a safe business to reduce the likelihood of a claim. Beyond that, it is best to work directly with your insurer to see if there are any terms or conditions you could implement that would help keep your premium lower. You can check out our recommended cheapest general liability insurance companies.
When you suffer a loss at your business, report it in a timely manner. The insurer will assign a claims adjuster who will first establish if coverage applies and then determine whether liability will be accepted or denied. This process can go quickly or be lengthy and will usually involve the gathering of facts and evidence related to the loss, including recorded statements and security camera footage (if available). Once the investigation is complete, the provider will move to resolve the loss either through a denial or some sort of settlement with the claimant.
Bottom Line
Preventing accidents and claims is the best way to save your company money on general liability insurance. However, you can’t prevent every bad incident from happening, which is why you should have a comprehensive general liability insurance policy to protect your company’s assets and reputation.
