September 18, 2013
By Arnold C. Young, HunterMaclean
Special to Business in Savannah
It’s important to make sure you and your business have adequate insurance coverage, but what sort of coverage is needed?
The standard policy for any business is a Comprehensive General Liability (CGL) policy – combined with auto insurance on company vehicles, worker’s compensation insurance and a property policy that covers both real estate and other property — will cover a large portion of business risks. CGL policies help protect your company, your employees and your assets from many but certainly not all risks.
That’s why it’s important to know the risks involved with your business, and obtain policies to protect you and your business. There are additional policies and coverage you may need. Despite the name, Comprehensive General Liability policies, in fact, are not fully comprehensive, not intended to cover all risks and have various conditions and exclusions which need to be understood and covered by other policies or special endorsements. While CGL policies are necessary and provide reasonably broad coverages, exclusions in such policies are as important to understand as the coverages.
In addition to the basic ones that any business should have, today’s business owner should consider Umbrella, Employer Practices Liability (EPL), Crime Policy and Cyber Liability insurance. Depending on your particular business, you might need other particular coverages such as a pollution policy or for product liability. For example, a real estate broker should have an errors and omission policy (E&O), which is basically malpractice insurance similar to what doctors, lawyers and architects purchase. A product manufacturer, on the other hand, needs product liability coverage.
An EPL policy covers claims/suits for discrimination (e.g. – sex, age, race), sexual harassment, improper termination or failure to hire. Such claims have become common. Beside the potential liabilities, the cost of attorney representation is a major issue. The defense cost provided by such policies is important. As with most insurance policies, the policy has two basic provisions – to protect from judgments and to provide a defense for the insured.
A Crime Policy covers theft by employees via bank transfers of funds or other means. While you want to trust your employees, the unfortunate fact is theft, often by quite sophisticated means, is a reality and a risk. Even the most trusted employees have the potential for the most serious thefts.
Umbrella policies are almost always a necessary coverage for a business. An umbrella policy provides for additional protection on top of your underlying policies. Frequently, the underlying policy such as the auto and CGL policies are not adequate alone in amount. The umbrella provides that additional coverage, and at a reasonable cost. If you think of your underlying policies as a picket fence with openings between the pickets, an umbrella policy makes the pickets higher and can fill in the gaps between the pickets.
Cyber Liability coverage is relatively new. If your company collects or maintains confidential or proprietary information of any kind in electronic form, the risks of unauthorized use or disclosure, loss or theft of that information can be a very real concern. This is especially true if the information is stored or available online and therefore subject to hacking attacks and other electronic threats from outsiders. Cyber Liability polices help address these issues and manage these risks. Coverage varies greatly, so be sure to review Cyber Liability policies carefully.
A Pollution Policy (or endorsement/addition to your CGL policy) should also be considered. Pollution injuries/claims are generally excluded from CGL policies. “Pollution” doesn’t just involve oil and chemical spills – it includes any sort of vapors from chemicals are considered pollutants. Your business may have such risks you haven’t thought of.
There are many shades of gray regarding exactly what’s covered by a particular insurance policy and under what conditions. The one fact of life that permeates the need for proper coverage is: If it can happen, it will… and at the worst possible moment.
All of life involves risks, but insurance is available to spread that risk at a cost. Help is available from insurance brokers or attorneys who deal with insurance coverage.
