Insurance Issues For Business Owners

In a previous issue of Legal Brief, I discussed protecting yourself with adequate auto insurance. This is, perhaps, the insurance that is most commonly bought, because every driver is required to be covered by automobile liability insurance. But what about business owners? Should they buy insurance as well?

This article discusses what insurance business owners should be aware of and how the insurance may protect them.

Insurance to Consider

The insurance available on the market today is as varied as the risks it is designed to protect. The most common insurance that business owners purchase is workers compensation insurance; California law requires every employer (except the State) to purchase workers compensation insurance or file a certificate of consent to self-insurance. Such insurance will not be discussed in this article. Equally important is general liability insurance. Other insurance available to the business owner includes disability insurance, key person insurance, and a personal liability insurance policy, also known as an umbrella policy.

General Liability Insurance

Perhaps the most commonly purchased insurance is the general liability policy. Like many property and casualty insurance policies, it provides two primary benefits, namely: (1) a defense to claims brought by third parties against the business owner for acts or omissions that are covered by the insurance policy; and (2) payment to the third party for any judgment or award rendered against the business owner in the event the business owner is found liable to a third party for any act or omission that is covered under the insurance policy. It is designed to protect the business owner against acts or omissions caused by the business owner that injure third parties; it is not designed to protect the business owner against injuries to himself or herself.

For example, if a customer enters your business establishment and slips in the entryway, then your general liability policy will compensate the injured party for any injuries sustained as a result of any negligence on your part.

Many general liability policies will also compensate the business owners for losses caused by the acts of third parties. For example, many general liability policies provide for reimbursement to the business owner for theft of property from the business establishment.

Not all risks, however, are covered by a general liability policy. The exceptions to coverage are generally included under the section entitled "Exclusions." Such exclusions include but are not limited to:

1. Any breach of a written or oral agreement;
2. Any breach of an express or implied warranty;
3. Trademark infringement;
4. Violations of Business and Professions Code Section 17200 and unfair competition;
5. The sudden and accidental release of any hazardous substances, including petroleum products, or pesticides that damage either the business o wner's or a third party's property;
6. The intentional acts of the business owner, including an assault and battery caused by a business owner or the employee of a business owner.

Recommendations for the Purchase of General Liability Insurance

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