Commercial Liability Insurance is Not Enough for Your Business

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Commercial Liability Insurance is Not Enough for Your Business on avanteinsurance.com

Employment practices liability coverage is important too

When you take your business insurance seriously, you’re doing the same for your reputation. For those without it, the risks of fines, court fees, or closure are ever present. There is also a second type of business owner who, for better or worse, falls into a similar trap.

We’re talking about taking out some insurance and thinking it’s enough. As a business owner, you want to cover yourself from all sides, inside and out. Commercial liability insurance is a solid way to protect yourself from external complaints and lawsuits, but it’s only half the solution.

For real peace of mind, it’s best to consider adding employment practices liability coverage to your insurance package.

A recap of commercial liability insurance

This type of insurance protects a business against acts of negligence that are classified as “non-professional.” Simply put, this refers to third parties who are not in your employ. Some examples of these would be a person (customer, client or other visitors) coming to physical harm on your premises, or they or their property coming to harm as a result of your employees’ actions.

It’s an important point to remember that both emotional and mental upset classifies as injuries. If your business is proven responsible for any such outcome, then commercial liability insurance will come into play to cover legal and medical expenses.

Due to the nature of the insurance, any ambiguity in the claim is usually in favor of the policyholder. If the policyholder is found at fault, the policy payout will go toward compensating the customer/visitor for their damages or losses.

The concept of advertising injury

Physical injuries are the easiest to qualify, with emotional and mental damage being a little harder to prove. Advertising injuries are not related to a person’s body or mind but to their reputation. Having a suit of this nature brought against you may carry accusations of slander, copyright infringement, invasion of privacy, libel, or misappropriation of advertising ideas.

With the average cost of copyright infringement alone being around a quarter of a million dollars, having commercial liability protection in place can be valuable.

How employment practices liability coverage works

While commercial liability insurance protects you from claims made by third parties outside of your operation, employment practices liability covers you in the event of internal claims. Not only does it offer coverage from a lawsuit filed by a dissatisfied employee, this second type of insurance can be valuable before they’re even hired.

Employment liability activates for several reasons, ranging from accusations of wrongful termination, harassment, and discrimination claims based on race, age, gender, or religion. What’s invaluable about this coverage is that it can look after business owners right from the interview stage. If an applicant feels they didn’t get a job due to discrimination, they could file suit. If they do, employee liability insurance will be in your corner.

A workplace can increase the chances of defeating employment liability claims by other means. Coupling this insurance with a well-defined company handbook detailing zero tolerance for discrimination and guidelines for hiring and work performance is a smart strategy.

The real cost of having no employment liability insurance

You may end up paying both past and future expenses via back and front pay. Back pay is reimbursing an employee for the wages they lost since the claim was filed. In the instance of a failure to promote due to discriminatory grounds, employers may have to pay the claimant the wages they would have received had they been promoted.

With front pay, terminated employees are entitled to receive financial payouts from their accused employer to support them as they seek other work. When an employee loses their job, their benefits go with it; that’s medical, dental, and retirement plans, among other things. Again, the employer may be held liable to cover such costs.

The nebulous risk of emotional damage is also present with employment liability claims. While there’s a tendency for juries to award emotional damages claims in direct relation to financial loss (which may favor lower wage claims), it’s not worth taking the chance.

Why it’s vital to keep employment liability insurance current

Employees with a grievance don’t always file suit immediately. Months or even longer may pass before they act to reclaim lost income or employment opportunities. Since – like any insurance – employment liability will only cover claims made while the policy is active, you don’t want to be hit with a claim during a lapse or absence of your employment liability coverage.

It’s also necessary to have a working knowledge of where you stand as an employer. Sites such as this guide from the U.S. Department of Labor and this regularly-updated study of employment risks provide relevant news and insight. The U.S. Equal Employment Opportunity Commission offers very detailed information on the various forms of discrimination and the laws in place to combat them.

If you’re a smaller business, these kinds of dangers and potential costs could mean the end of your company. That said, the damages awarded tend to be higher based on the number of employees.

Bring a qualified insurer onto your team

When it’s your livelihood on the line, it’s always best to consult with an insurance professional. Not every employer runs the same risks, so no single solution solves everyone’s problems. When you want one-on-one advice that’s customized to your circumstances, Avante would be happy to help.

Avante Insurance is a South Florida family owned and operated agency providing an array of insurance services to meet the individual needs of our customers. If you need information, call us at 305-648-7070 or contact us with any questions or comments.