Your business is important to you. You’re proud of what you’ve built, so naturally, you want to protect it. But how do you know if your insurance covers every possible scenario? Even if it does, how much do you need to pay for the coverage? There’s no one-size-fits-all solution to protecting your business against risks. But there are some situations where extra liability coverage makes sense, and somewhere it doesn’t. Here are several times when additional liability coverage can be helpful.
Customer Injury or Property Damage
If your business doesn’t have excess liability coverage, it could be held responsible for injuries or property damage suffered by customers. It could happen if one of your workers accidentally injures a customer or even through the negligence of a vending machine you own. Even if no lawsuit is filed, the injured party can still file a claim with their insurance company and ask them to pay for damages.
If the injured party has health insurance, they may try to get reimbursed from that first before filing a claim with you. But what happens if they don’t have health insurance? Or what happens if their injuries are so severe that they require extensive medical care? In these situations, you could be on the hook for hundreds of thousands—even millions—of dollars in costs associated with hospitalization and rehabilitation services.
In cases like this, where there’s little hope of recovering any money from another source (such as an uninsured driver), many businesses seek out excess liability coverage. They consider it part of their commercial policy because it takes care of such costs without passing them to taxpayers through higher premiums for all drivers’ policies.
Product Liability Claims
If your business manufactures or distributes a product, there are many reasons why you may be held liable for damages caused by the use of your product. As of December 2021, there are around 408,000 product liability cases in 60 multidistrict litigations (MDLs). If it turns out that your company’s products have been involved in an accident, whether or not they were directly to blame, you can face legal repercussions. It means you will want to ensure that your business has enough liability insurance coverage to handle any potential claims against you.
Excess liability coverage protects these types of claims. It helps keep costs low when they arise, and it could even save your business from total failure if a claim ultimately ends up being high enough to bankrupt you. However, like all other kinds of coverage offered by commercial insurance policies, excess liability does tend to come with its own set of limits and restrictions on how much money it will cover each year.
Auto Accidents Involving Company Vehicles
In the first quarter of 2022, 9,560 people died in motor crashes, as reported by National Highway Traffic Safety Administration. It is the highest first quarter fatalities since 2002.
Excess liability coverage can help a business pay for damages to other vehicles, property, and people in an accident involving a company vehicle. For example, suppose you’re in an auto accident with your employee driving a company vehicle on their way to deliver goods or services. In that case, you may be held liable for any injuries caused by accident.
Excess liability coverage usually consists of two parts, deductible and premium amount. The deductible refers to how much money you would have to pay before the extra liability coverage kicks in. It will generally range between $1 million and $2 million, depending on the type of policy you buy. The premium amount refers simply to how much each month or year will cost you. It could vary greatly depending on how many vehicles are covered under both policies.
Sexual Harassment Claims
Sexual harassment is a severe issue in the workplace and can be costly for both employees and employers. It is one of the most commonly litigated employment-related issues today. The Equal Employment Opportunity Commission (EEOC) received more than 27,291 charges alleging sexual harassment from employees.
In addition to covering legal fees associated with defending yourself against these claims and paying settlements when they arise, excess liability insurance can also cover any adverse impact of bad press related to this type of case. It includes adverse effects on employee morale and public relations costs associated with responding to negative media coverage or social media comments about your business’s conduct during an investigation or lawsuit.
A Lawsuit Over a Business Dispute or Faulty Work
When a business is sued over a business dispute or faulty work, the company could be liable for damages and forced to pay those damages out of its pocket. If you have excess liability coverage, your policy will cover these costs and relieve you from paying out of pocket.
Excess liability coverage can also help protect your business from lawsuits over disputes related to contracts or agreements that you’ve entered into with others. For example, if one of your suppliers sues you because they believe you breached their contract with you, then the amount claimed by that supplier would be covered by your excess liability policy.
Another area where excess liability coverage applies is when there’s been some fiduciary duty breach or wrongdoing committed against another party related to contracts or agreements between them and either yourself or one of your employees/employees working on behalf of yourself as an independent contractor while under contract with another organization (this includes both legal advice/representation as well as any other services rendered). Again though – this type-specific coverage only kicks in if there’s been an actual violation first, so it won’t apply every time someone tries suing someone else.
Excess Liability Coverage Can Help a Business Cover Costs in Case of Lawsuits
Primary liability insurance, required by law in most states and includes coverage for bodily injury and property damage, is only one component of the insurance package that protects your business from potential lawsuits. Excess liability insurance can give you additional protection against large claims if you have this primary liability coverage.
Excess liability coverage is a form of insurance. However, it’s different from primary or underlying liability policies because it’s usually purchased as an add-on to those policies rather than being purchased as stand-alone coverage. So it would help if you had other policies already in place.
As you can see, excess liability coverage is a great way to protect your business from unforeseen events that could lead to lawsuits or other costs. We hope this article provided insight into how it works, why it’s needed, and when your company should consider purchasing it.
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