Liability Insurance Issues

Risk is no game when protecting yourself against liability.risk image by Francesca Marcolini from Fotolia.com

Liability Insurance policies cover people and organizations against lawsuits for personal injury or damages arising from accidents, actions or even personal negligence. These losses may occur on your property, be caused by you or your property, or be a result of your actions or failure to act in the course of your business or personal life. When considering liability insurance for any purpose, here are some common issues to consider.

Kinds of Coverage

General liability insurance, the chief type of coverage for a business or individual, covers common types of losses arising from injury, property damage and advertising claims. Professional liability insurance covers professionals against malpractice, errors and omissions arising from the practice of a service profession. Lawyers, doctors, technical contractors and consultants carry this type of coverage. Directors and operators insurance falls under this category, but is specific to boards of directors and protects against personal laws if a lawsuit is brought against the organizations they direct. Product liability insurance protects a business from being sued for injury or damages arising from the use of the product it makes. Umbrella liability insurance policies provide separate coverage of unforeseen gaps in your coverage. Temporary liability insurance covers special events or specific projects for the length of the project. These policies cover fairs, trade shows, festivals, charity events and short-term projects. Finally, if you hire employees, worker's compensation insurance covers accidents or injuries to your employees while they are working for you.

The amount of liability coverage you need depends first on your perceived risk. If the type of activity or product produced by your company puts you at higher risk, you will need more insurance. For that matter, if your personal activities entail risk you will need more insurance. A company that builds automobiles has greater risk for lawsuits than one that makes clothing. A physician would be at greater risk than a self-employed janitor. A wealthy family with children faces greater risk than a young couple in a modest apartment and a movie star with a swimming pool on his terrace is more vulnerable than a retiree with a shuffleboard court on his patio.

The state in which you live or operate also determines amounts of coverage. Some states offer a legal environment that encourages high levels of litigation. You'll need more insurance in those states than in states that have tort limits. Some communities within your state may have higher accident rates or more frequent incidences of litigation than others. Talk to your insurance broker about these factors to determine a level of coverage that's right for you.

Control the cost of your liability insurance by taking precautions that limit your risk. High quality control standards, complete records, consistent maintenance and safety policies, along with thoroughly documented and up-to-date employee training, have been shown to significantly reduce risk. Add safety features like fences around pools, fire extinguishers in kitchens, accessible doors and bathrooms to reduce your risk of lawsuits. Your insurance company is your best resource. They not only give you safety tips and help you assess and correct risk factors, but also provide extra temporary or special coverage for high risk projects or activities. Extra coverage can include everything from building an office to scuba diving in the Caribbean.

While general liability insurance covers a wide range of potential loss, exclusions written into the policy can prove to be important. Fail to examine these exclusions and you may find yourself facing huge costs from violent or malicious acts, arson, deliberate acts of discrimination, perjury or damage caused by vehicles not specifically covered under the policy. An employee could injure a customer with his own car, for instance, but if he was working on your property at the time and you don't have a policy against his car being where it was, you may be held responsible for the employee's action. It is important to know what your insurance does and does not cover so that you can adjust your company's policies and procedures accordingly.