Does Your Company Need Liability Insurance?

Liability insurance is designed to protect the assets of a company in the event of a lawsuit. For the long-term financial health of your business, we recommend you evaluate your risk potential and review your existing coverage. Several different types of liability insurance coverage are available. Some will be more appropriate for your business than others.

General Liability Insurance
General liability insurance is often required to meet lease and contract requirements, including indemnity agreements. General liability primarily covers suits arising out of bodily injury or property damage. Such claims are often made when an accident occurs at your site. Coverage may be provided for injury caused by you, your employees, or subcontractors or suppliers working on your behalf.

Whether or not you are required to carry general liability insurance by your leasing company, you will probably still want to carry this insurance if customers and others visit your company site. Don’t let the name fool you – it is standard for general liability policies to contain many exclusions and, depending on your company’s situation, you may need additional types of liability insurance to be fully protected.

Following are a few more types of liability insurance.

Directors and Officers Liability Insurance
This insurance provides financial protection for the directors and officers of your company in the event a suit arises relating to the performance of their duties for the company.

Directors and officers liability insurance will often be required by a board of directors or by venture capitalists who will make this insurance a condition of funding your company. If you do not have employees or a board of directors and are not seeking funding, you probably won’t need this insurance.

Otherwise, you may.

Directors and officers liability insurance may also include employment practices liability and/or fiduciary liability.

Employment Practices Liability Insurance
Some studies estimate that three out of five firms that hire employees will be sued by an employee. So, if you hire employees, it would be prudent to carry this type of insurance.
Employment practices liability insurance covers suits involving harassment and discrimination made by employees, former employees or potential employees. In addition to discrimination and harassment, it also covers wrongful termination of employment and other employment-related allegations.

Fiduciary Liability Insurance
This type of liability insurance covers you in the event of mismanagement of funds. It is nearly always part and parcel of a directors and officers liability insurance policy. But if this is an area where you may be vulnerable, you’ll want to make certain you’re covered.

Errors and Omissions Liability Coverage
Directors and officers liability is often confused with errors and omissions liability. However, errors and omissions is concerned with performance failures and negligence with respect to products and services, not the performance and duties of management. Depending on the nature of your business, you may need to carry both policies.

Professional Liability Insurance
In some professions, it is wise for individuals to carry professional liability insurance. These policies cover employees whose professional role makes their work especially vulnerable to suits. These include accountants, doctors, lawyers and architects. Because the types of claims can vary widely by industry, when purchasing professional liability insurance coverage, it is important to work with an insurance company that specializes in this professional area.

E-business Liability Insurance
With technology ruling our lives these days, with such things as e-mail, Internet access, instant messaging and social networking, come new exposures for businesses.

When you don’t have total control over the messages, and the messages can be sent in an instant to thousands of people, your company is vulnerable. E-business liability insurance has been created to protect companies from this exposure.

This type of insurance may cover media or intellectual property offenses (claims of libel, defamation, slander, copyright and trademark infringement) and breach of security claims made against your company for either your employee’s actions or those of a hacker who gained access to your systems. Companies that should certainly consider e-business liability insurance include those involved with content creation or those who engage in e-commerce.

To find out what type of liability insurance coverage your company needs, meet with a reputable insurance agent, and bring existing policies to identify where you may have gaps in coverage. While you may not need every type of liability insurance, you’ll want to make certain that you’re covered where and when you need it.

Contact a CRI partner for help in evaluating your risk potential.

These articles are published for the use of our clients, advisors and friends. The technical information they contain is necessarily brief. No final conclusion on these topics should be drawn without further review and consultation. For additional information, please contact our firm.