For those who own or occupy properties, this can usher in potential liability exposures – from slippery sidewalks to snow-covered entranceways. Business operations that involve shareholders, employees and the public can expose companies and their officers to liability. A seemingly minor incident can turn into a liability claim.
To protect you financially, liability insurance is imperative in the event you are responsible for any injuries and/or damages sustained on your property.
What is a liability policy?
Though there are several types of liability policies, they all share a common theme: To provide indemnification – compensation for harm or loss – and/or defense when the injured party files a claim against the policyholder.
What claims are covered by liability policies?
Usually, the claimant (injured party) alleges the defendant (policyholder) has done something – or failed to do something – that has caused the claimant a loss or injury in which they seek compensation or relief. The specific type of claim, allegation or demand determines which policy type is best-suited to respond.
| Policy Type | Types of Claims |
|---|---|
| Commercial General | Commercial General Bodily injury, property damage, personal injury (slander, libel, false arrest, malicious prosecution, privacy breach). |
| Director and Officers (D&O) |
Alleged wrongful acts related to mismanagement and breach of fiduciary duty. Employment practice issues may also be included if the policy has been so extended. |
| Employment Practice | Employment practice issues, discrimination, harassment, wrongful termination, etc. |
| Errors and Omissions | Concerns that alleged breaches of professional duty. |
| Environmental / Pollution | Provides property and liability coverage for cleanup costs and property damage / bodily injury associated with pollution events |
| Cyber | Data breach, social engineering fraud, ransomware, cyber-related privacy breach. |
| Legal Expense | May provide coverage for legal costs to defend or pursue legal rights in a number of circumstances. |
The complexity of allegations commonly requires the involvement and coordination of two or more types of liability policies.
Understand that one policy may not include coverage for all categories or severities of loss/claims to which you or your business may be exposed. It's important to fully review the needs of your business with your broker and align those with the right product in all cases. This is especially crucial with cyber exposures due to the specific types of policies, which may or may not be required.
What makes reporting liability claims to both my broker and insurance company so crucial?
There are several reasons why this important:
- Timely reporting of claims/incidents that could lead to a claim is typically a requirement in most policies. “Claim” in this case encompasses any written demand, from legal notices to emails demanding compensation. Failure to report such events to the insurer could jeopardize your coverage.
- Over time, the insurer’s ability to investigate diminishes. Evidence vanishes, and witnesses may forget crucial details. This can weaken the insurer’s defense, or in the worst case, may prejudice the insurer’s ability to provide coverage at all.
- Policies often require notification of incidents or claims within the police period or some other set timeframe. Failure to do so can jeopardize coverage.
- Involving the insurer early allows the policyholder to access professional legal assistance if available. Typically, policies do not cover legal fees incurred before their involvement or without their consent.
What if we think the claim is frivolous or will not amount to much?
Seemingly innocuous incidents or demands can unexpectedly escalate and grow. As claimants become more persistent, legal proceedings can become more complex with evolving arguments and evidence. If the policyholder hasn’t informed the insurer, they may find themselves unprotected and vulnerable.
What does “putting the insurer on notice” mean?
This term usually means that the policyholder informs the insurer of an incident that hasn’t resulted in a claim yet but might in the future. Notifying the insurer satisfies the requirement to do so and provides them with the opportunity to investigate. This approach ensures compliance with reporting requirements and other considerations mentioned earlier, representing a “better safe than sorry” approach. Any subsequent actions the insurer may take, such as investigating or engaging legal counsel, are at their discretion.
Remember …
Notify your insurance broker immediately about any exposures to stay protected.
Disclaimer: This bulletin is intended to provide readers with general information only. Readers are urged not to rely solely on the content of the bulletin, but to consult with appropriate porfessionals on a case-by-case basis.