This article is part of a larger series on General Liability Insurance.
As a business owner, you need to be prepared for anything and everything. Accidents could happen that you are liable for, which might cost thousands of dollars. Without general liability insurance, you’d have to pay those claims out of your pocket. Fortunately, a general liability insurance policy can mitigate those expenses when they arise. Even with a policy, you’ll want to do your best to reduce risk and avoid as many accidents as possible.
Typical General Liability Insurance Claims
There are many types of incidents that can lead to a general liability claim when you’re in business. Learn what the risks are and how to avoid accidents that could cause your insurance premiums to go up.
Here are five examples of general liability claims and ways to avoid them.
1. Slip-and-Fall Claims
Slip-and-fall claims make up about 10% of all small business insurance claims, with the average claim costing around $20,000. An example of a slip-and-fall might be when a patron is walking 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-and-Fall Claims
To avoid slip-and-fall claims, make sure that people are aware of any hazards. Use cones and signs that indicate a wet floor to redirect people to a path that is safely away from hazards. Make sure to install nonslip floor rug pads or tape to reduce the chance of slipping in high-traffic areas. Advise workers to be aware of incidents that may cause a slippery floor and to act quickly to mitigate any problems. Slip-and-fall claims often fall under the premises liability coverage in general liability insurance.
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 he loses control, and the wheelbarrow collides with the client’s car, creating a big dent.
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. Make sure there is enough space to work without putting client property at risk.
If your clients come into your place of business, make sure 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 making a public claim (perhaps on social media) that your competitor is a “crook.” Your competitor may sue you because his reputation is damaged and he is losing business.
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, and make sure you know how your employees talk to customers as well. Train them on appropriate ways to talk about competitors.
4. Products-completed Operations Claims
When there is a defect in a completed product or some other problem with the product that leads to property damage or injury, products-completed operations claim coverage kicks in. However, this won’t protect a business from recalls of items.
How to Avoid Products-completed Operations Claims
To avoid products-completed operations claims, set a high standard of excellence for all products. Make sure you 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. 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
If you want to prevent claims related to liquor liability, you probably want to make sure that alcohol is not allowed at company events or on company property. If you do decide to host an event with drinks, make sure you keep tabs on who might be drinking too much. Offer to book ride-sharing so that no one drives under the influence. Limit the amount that anyone is allowed to drink at the event.
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 as well as any legal and investigation costs you might incur from the claim. For example, if a person files a slip-and-fall claim for $30,000 in medical bills and lost wages, your policy will pay that amount—unless you suspect fraud, in which case an investigation might be conducted by the insurance carrier to prevent paying a fraudulent 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 eat up policy payout caps quickly 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 understand fully if you have enough liability coverage.
3 Claims Your General Liability Insurance Won’t Cover
- Professional liability claims: Damages resulting from a professional error in your work or workmanship are covered by errors and omissions (E&O) insurance, not general liability.
- 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 rather than general liability insurance.
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.