General Liability is Not Enough

It happened without warning …
Everything went smoothly with the release of your latest software upgrade. Or so you thought. Soon after, customers complain that their computers crash when they install your product. To make matters worse, they sue your company for hundreds of thousands of dollars. The damage to your company’s reputation is bad enough. But your product liability insurance does not cover losses arising from faulty software or programming. How will you pay attorneys fees and damages to your customers?
(Hartford Brochure 2009: A Hands-On Approach to Insuring Innovation)

I never make mistakes...
An accountant audited financial statements which were relied upon by the creditors of 3 plumbing companies. The creditors lent $65,000,000 to the Insured’s client. The plumbing companies defaulted on the loans and fled for bankruptcy. The accountant’s audit procedures did not comply with GAAP. Cost to defendant: $4,175,000
(Philadelphia Brochure 2009: Claim Scenarios, Accountants Professional Liability)

Is General Liability enough?

The answer to that question depends on what business you are in and the services you provide.

Questions you should be asking yourself:

• Do I offer a professional service?
• Am I giving advice in addition to selling a service or product?
• Am I doing any designing?
• Could a glitch or error in my services cause my client a loss?

If you answered yes to one or more of these questions, then you need to look into Professional Liability or Errors and Omissions insurance. General Liability policies have an exclusion for professional services meaning that if someone sues you for something you advised them to do, then you are on the hook for legal fees, settlements, and protecting your good name.

Examples of people that need Professional Liability:

• Doctors & Lawyers
• Consultants & Inspectors
• Web developers, software engineers
• Technology Consultants
• Insurance Agents
• Real Estate Agents
• Accountants, CPAs, Bookkeepers
• Engineers, architects, landscape designers
  

Ways to protect yourself:

• Have your contracts with clients reviewed by your attorney
• Back up all data on a redundant server
• Purchase a Professional Liability policy for your service

Things to look for in a Professional Liability policy:

• Is defense inside or outside the limits? Often times legal fees can eat up most of the limits and you may not have enough money left in the policy if there is a settlement. When defense is outside the limits, you will have your entire limit to pay a settlement.
• Does your policy exclude bodily injury? Some policies will exclude claims if someone gets hurt from something you advised. Example: An tree consultant may say a tree is healthy, then it falls on someone.
• More exclusions. Make sure you are reading the small print and you address your concerns before binding the policy. Companies may change the wording in a policy if it means attaining your business.
  

Talk to your agent to see if you are covered correctly.

Business Income, do you have it?

If a fire or other covered loss damages your building enough that you have to stop doing business, how are you going to recover from the lost income? How are you going to pay your key employees, so they don't go to the competition? How will you pay your fixed expenses like your loans, mortgages, and leases?

Business Income provides money for lost income due to a loss. Many companies overlook this coverage as an "extra" when this is one of the most important coverages.

Things to consider if you have a total loss and have to rebuild:

• The time it takes to settle with the insurance company (0-3 months)
• How long it will take to get permits to rebuild (6-12 months)
• The actual time of construction, including delays (6-24 months)

Total time can be from 12-39 months before you are back in business. Most business owners policies offer around 12 months. Other property packages may leave off this coverage in order to show a cheaper overall price.

Make sure that you have a good amount of coverage in this area if you depend on your place of business to create your income. Look at the average time to get a permit in your area as well as the actual time of construction.


Other things to consider:

• Waiting period - When something happens to your income, you want to be compensated from the moment. Make sure there is no waiting period, this is worth the extra few bucks.

• Choose "Actual Loss Sustained" instead of a set number or percentage of income. This way you get reimbursed all your expenses throughout the period of the loss.


• Dependent Properties - Are you subcontracting your production to a local factory. What if they have a loss and you don't have an alternative supplier? What if the store next door burns down, but passage to your store is blocked?


• Extra Expense - This coverage will pay you the difference between the income after the loss and before the loss. It may take you 6 months to a year to get back to your prior income.

• Make sure your books and sales figures are accurate. If you are used to making overly conservative estimates on your sales figures in order to pay a cheaper premium, this may come back to bite you. Business income is often based on a percentage of sales.

Photo Credit & Caption: Firemen standing at the burnt out shell of the Harley Davidson business in Blacktown.Photo: Dallas Kilponen

Welcome to my Insurance Blog

Thank you for coming to my blog. I have created this blog in order to provide important tips and information regarding insurance to you the consumer.

Insurance is complicated and many times insurance buyers only look at the final price when making their decision. The amount of coverage, exclusions of a policy, strength of the company and the little extras that an experienced and well trained agent offers can make an enormous difference in the case of a loss. I hope that you find that this information helpful.