November 8, 2021

Business Liability Insurance

Business Liability Insurance

A business’s liability refers to its obligation to pay for any damages or compensation for loss suffered by a third party on account of the business’s activities or products.

Businesses undertake multiple types of liability in their day to day operations- whether it’s releasing products, hiring new workers, or running consultancy activities.

That’s where Commercial Liability Insurance can help. This policy protects your business’s assets and finances by covering all legal expenses, medical costs and payable damages that may arise when

  • A customer gets hurt on your business’s property
  • Your product causes adverse reactions
  • Your chief officers commit wrongful acts,

and other such instances.

Liability Insurance policies form perfect additions to Fire and Allied Perils Insurance by greatly reducing your risk exposure and offering you all inclusive coverage. Moreover, there are instances whereby corporations are bound by a contract with their clients to procure liability insurance before commencement of a new project or assignment.

Let’s look at some essential Commercial Liability Insurance policies:

This insurance provides a broad liability coverage to your business protecting it from general liability risks including bodily injuries or property damage to third parties due to business products or operations. More commonly known as a CGL policy, this insurance covers defence costs incurred by the policyholder in event of a liability legal suit being filed on them.

This insurance is considered an “all risk” policy and is often a business’s first line of coverage as it offers general indemnification for all the covered events. It must be noted that this policy excludes certain specific risks such as professional indemnity and Directors’ & Officers’ liability, among others. These risks can be covered by taking separate liability policies.

Learn more about a CGL policy here

Your company’s chief managerial staff functions with a lot of autonomy and authority. They are responsible for directing the course of your organization, and make frequent decisions that have a big impact on your company’s growth, profits and reputation.

Directors and Officers Liability Insurance protects all Directors & other senior management employees from any legal liability arising out of their negligence during their decision making process. Under this policy, the defence costs, any payable compensation to third parties and other financial losses are covered. All managerial and supervisory personnel are covered under this policy.

Learn more about D&O Insurance here

This policy is ideal for consulting businesses, lawyers, professionals, and businesses that are service oriented like brokers, financial advisors, medical professionals, etc.

It offers protection against legal claims, lawsuits, and settlements that may occur due to these businesses’/professionals’ negligent acts or misconducts during the course of their professional duties. The costs of claims made on grounds of negligence or inadequacy in work are covered through this policy.

Learn more about this policy here

The Consumer Protection Act, 2019 formally introduced the concept of product liability to protect consumers from the adverse effects or injuries suffered due to a company’s products. According to this, the company is liable for any injuries or death caused to consumers because of their product(s).

So it has become customary for some companies, specifically pharmaceutical firms,  electronic companies, car manufacturers, etc. to purchase Product Liability Insurance. Manufacturers and suppliers of products can purchase this policy to secure themselves from legal or financial troubles that may arise due to the ill-effects of one or some of their products. Obtaining such insurance is mandatory in some countries especially in the food and beverages industry.

Learn more about this policy here

This insurance offers one of the most basic coverages, protecting your business from claims of bodily injury, property damage or death made by a third party occurring as a result of mishaps on the insured premises. This insurance is by and large an endorsement/addition added to other insurance policies like Property Insurance, General Liability Insurance, Commercial Auto Insurance, etc.  Third party, here, refers to anyone who is not involved in making decisions on behalf of your business. In the event of an accident occurring on your business property, for example, a visiting customer tripping on uneven pavement and breaking their leg, your liability for such an injury will be covered by Third Party Liability Insurance.

Businesses like restaurants, hotels, shopping establishments very commonly purchase this basic cover. General exclusions of this policy are cyber crimes, professional liability, and other specifics. However, these have their own dedicated policies.

Learn more about this policy here

Having this liability policy is compulsory for certain kinds of businesses with more than 20 workers. It seeks to indemnify the business from any workplace accidents that may result in bodily injuries or death of the worker. Additionally, medical expenses, lost wages and monetary compensation can also be covered through a Workmen Compensation Insurance policy.

This policy lifts the financial and legal liability from the business and provides sufficient covers for the workers.

Learn more about this policy here

A cyber risk policy can protect your business from first and third party liabilities that occur due to cyber threats and crimes. Risks such as loss of electronic funds or data, e-vandalism, crisis expenses and business interruption costs are covered through this insurance.

Additionally, the costs of hiring a professional negotiator or surrendering payments for cyber threats, and credit monitoring expenses are also provided for. In our current digital age where cyber crimes are only on the rise, this policy has become crucial.

Extended Warranty Insurance policy is designed to offer extended warranty to an asset over and above the Original Manufacturer’s Warranty (OMW). It protects the insured assets from damages or breakdown that occur due to manufacturing defects during the policy period. This is the only cover offered by this policy, while losses due to accidental damage, normal wear and tear, theft, etc. are not covered.

Since this is a very small policy offering single event coverage, it is generally taken in conjunction with a Fire and Allied Perils policy to cover manufacturing defects as well.

Liability Insurance forms an important part of a business’s risk management portfolio. Coupled with applicable property insurance policies, it can equip your company with requisite security leaving you free to focus on growing your organization further.

Insurance is not reserved for well-established businesses. Startups also need it to ensure steady growth. Check out some essential Insurance policies for Startups here

Opinions, conclusions and statements of intent expressed in this article are that of the author and Verak does not accept liability for the views expressed unless confirmed by an authorized representative of the Company independently of this communication.