What Does General Liability Insurance Do?
So you’ve got a business and you’re asking yourself, do I need to insure my business? The answer is yes. I know, I know, we’re “insurance people,” of course we’re going to say that but let’s take a quick trip to “what if” land. What if the actions of your business harms a client or a just a normal joe using your product? What if you injure someone while conducting your business? What if someone gets hurt using your product? What if your product or service ends up causing property damage because of improper use, poor workmanship, or defect? All of these scenarios would be covered by the General Liability policy (we simply call it “GL,” feel free to use it so you can feel like you’re in the know).
So the technical definition of GL is as follows: “This type of insurance protects your business from claims arising from you legal liability for injury or damages to other people or their property. Coverage payments can include judgments, attorney fees, court costs, or other related expenses as defined in the form.”
That’s a lot of legal jargon to say what we said above but let’s put it into context with some real life business examples.
Your business repairs a commercial work truck by replacing a cracked cylinder head. One of your lead techs was doing too many vehicles at once and accidentally reused a head gasket instead of grabbing a new one. This leads to a breakdown of the vehicle 125 miles away from your shop. The client tows the vehicle back to your shop and you notice that the head gasket failed after 800 miles since they were classified as single use. The owner of the commercial vehicle is suing you for faulty workmanship, the 125-mile tow, and 2 weeks of commercial rental vehicle fees.
General Liability Insurance for a Photographer
You’re a wedding photographer doing a “trash the dress” bridal session. You submerge your bridal client in a nearby river in a complete throwaway gown, hair, and make-up to mid-chest so you can get the shot. Look how edgy you are. During the session, your assistant drops a boom with a light on it, hitting your client in the head, dizzying her. She goes under, is saved, and revived before the ambulance gets there. She spends 2 days in the hospital recovering with 17 stitches in her forehead the week before her wedding. She’s suing you for damages, emotional distress, and also launched a pretty negative campaign on social media against you and your studio. You are fortunate that she survived.
You’re moving a 100-ton glycol air chiller unit to the 5th floor or a local hospital. Your crane operator forgot to properly weigh the load and counterweighted the crane incorrectly. Your crane topples over while the load is extended out 100 feet, the boom smashes into 9 cars, 4 people are injured, and the chiller is a total loss. You are getting sued for property damage, bodily injury, and loss of use for the hospital as they’re now delayed opening for 6 weeks until a new chiller arrives.
Your new restaurant is the hottest spot in town and you’re just trying to keep up with the wait list and staffing requirements for a new restaurant. One of your wait staff tells a patron that everything they ordered does not come into contact with shellfish. Unfortunately, due to the volume of orders, a line cook starts frying crabs cakes in the second fryer that is usually dedicated for fries. Bob Smith, halfway through the fifth Freedom Fry, goes into anaphylactic shock due to a severe shellfish allergy. In a moment of what can only be described as pure chaos from watching the YouTube video, Bob is seen toppling over 3 tables while trying to get to an overpriced Epi-pen that he left in the car. He doesn’t make it and dies. Bald Eagle Fish Fry and Pho is being sued for 5 million dollars. It turns out Bob was a married to prominent injury attorney in the area.
You made this one off ABS plastic housing with ball bearings for your kid and it turns into a national sensation. Fidget spinners are all the rage and even the President’s son was seen with one while exiting Air Force One. 5 years later, every 16-20 year old suffers from carpel tunnel syndrome and Dr. Oz just told the world it’s your fault on network TV. A class action lawsuit is filed against you for causing undisclosed harm and an entire generation is asking for their 4.99 back plus damages. Just like Steve Martin in The Jerk, you’re now faced with bankruptcy, an empty house, a failed business and a repossessed Ferrari.
How Much Is a General Liability Policy?
All of the cases above would be a claim under the General Liability policy. A GL policy can be bought with limits as low as 500,000 up to 20+ million in coverage depending on the type of business. Also dependent on the type of business, would be the price. GL policies are usually rated on sales and each class of business is given a rate per X dollars in sales. The riskier or more accident prone the business, the higher the rate. This rate might be 20.00 for a church or 200.00 for a toxic waste removal company. Also, experience, credit rating, years in business, frequency and severity of claims and many other factors can change the rate significantly. When you buy GL insurance, you actually buy it on a forecasted amount for the future year. At the end of the policy, you’ll get a phone call, letter, or if you’re really lucky, a visit from the insurance company to firm up final sales numbers for the policy term. If you undershot the forecasted estimate, you’ll need to pay an additional premium audit since the insurance company was at more risk than they were led to believe. If you overestimated your sales, you should expect a return premium or a partial refund for your policy.
Need a General Liability Policy for your business? Give our business experts a call at 972-490-2238 and tell us more about your company. We can usually get a quote turned around to you pretty quick and look forward to hearing from you!