3 questions on business liability insurance
You've taken out liability insurance to protect your business against accidents and other problems you might encounter on a daily basis. But do you know what your insurance actually includes? Read on for a closer look at what's covered, what's not covered and how it's different from professional liability insurance.
What does business liability insurance cover?
Liability insurance External link. protects your business in the event of claims or legal action from individuals or other third parties who have suffered bodily injury, property damage, personal injury or advertising injury.
As long as the claim is covered under your policy, liability insurance will cover your legal defence costs and the compensation you would owe to the third party if your business is held liable for damages or harm. It applies to your business operations, including your places of business, products, services and activities.
What type of situation could your business be exposed to? Here are a few real-life examples.
Management consulting firm
Imagine you own a management consulting firm and you've set up a meeting with a client at your office. They fall down the stairs and are seriously injured. In fact, they develop a permanent disability and are unable to continue working as an electrician. They sue you for $600,000 based on their injuries and loss of future income. In this scenario, your business liability insurance could cover your legal costs and any compensation you need to pay out.
Cleaning company
Your commercial cleaning company provides janitorial services at a pharmacy during off hours. One of your employees goes to the maintenance room to get a mop and bucket. In doing so, they accidentally snag an electrical circuit breaker, cutting off power to a fridge that contains $40,000 worth of vaccines and medicines. The entire contents of the fridge are a write-off. Luckily, you have liability coverage, so your insurer will defend you, in accordance with the provisions of your policy, and could negotiate a settlement with the pharmacy owner.
What is professional liability insurance?
Professional liability insurance (also called “errors and omissions insurance”) protects your business against any errors, omissions or negligence that may occur as part of your professional services. People make mistakes, but it’s hard to know whether a disgruntled client is going to file a suit alleging professional negligence or error. This insurance may cover certain legal fees and financial losses in the event of a claim or lawsuit. Here are some situations where the right coverage really comes in handy.1
Bookkeeping firm
An employee at a bookkeeping firm takes on a client and forgets to put the invoices the client needs to pay on their books. As a result, the client stops paying their suppliers. Sometime later, the client discovers that a number of suppliers have stopped providing their services, which shuts down operations for several days. The client sues the bookkeeping firm for lost revenue caused by the shutdown. In this scenario, your professional liability insurance could cover your legal costs and any compensation you need to pay out.
Hair salon
A regular customer goes in for her monthly hair colour appointment. She and her stylist talk it over, and the stylist decides to try something new by changing up the colour. A few minutes after the stylist applies the dye, the customer notices a burning sensation. The stylist realizes that the scalp has been severely burned by the bleaching process. If the hairdresser has professional liability insurance, it could cover the costs of any potential lawsuit.
Why is liability coverage important for the directors and officers of a condominium corporation?
In fulfilling their role, the directors and officers of a condominium corporation can sometimes make errors for which they are liable. Condominim Corporation Directors and Officers Liability Insurance may cover financial losses and legal defence costs in the event of a lawsuit alleging wrongful acts by the directors and officers of a condominium building as part of their duties.
For example, say the condominium corporation governing documents state that condo owners are not allowed to have a BBQ on their balcony. The condominium corporation doesn't enforce the rule, and a condo owner's BBQ explodes and damages the neighbouring units. The insurers for the owners affected by the explosion sue the condominium corporation. Directors and Officers liability insurance could cover any financial losses resulting from wrongful acts.
Benefit from an insurer who cares about business owners, along with free legal assistance and business concierge service. Additionally, Desjardins Business Insurance offers you personalized services.*
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1 The situations presented are fictitious examples and are provided for illustrative purposes only.
*Automobile, property and business insurance products are underwritten by Certas Home and Auto Insurance Company. These tips are provided for information and prevention purposes only. They are general in nature, and Desjardins Insurance cannot be held liable for them. We recommend using caution and consulting a property and casualty insurance agent for comprehensive, tailored advice. Certain conditions, limitations and exclusions may apply. The terms and conditions of the coverages described are set out in the insurance policy, which always prevails. Desjardins®, Desjardins Insurance®, all trademarks containing the word Desjardins, as well as related logos are trademarks of the Fédération des caisses Desjardins du Québec, used under licence.