What does Commercial Liability Insurance cover?
Mar 01, 2010 in
Liability insurance
My husband is starting a welding business and we got a quote today from an insurance company for Commercial Liability Insurance that includes coverage for his tools as well. What does this all cover, I understand the tools part (for the most part) but I do not completely understand what commercial liability covers. I tried Google’ing it I just got “get a quote sites”.
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5 comments
Brian Hackett on February 3, 2010 at 5:30 pm
First things first, the agent you obtained the quote from should be more then willing to explain this to you. If not, then do yourself a favor and obtains quotes from other agents/brokers.
Basically liability can be defined as:
“An individual or business may incur a loss as a result of their actions toward other people or their property. Such losses are called liability losses. A liability loss occurs when a person is determined to have been responsible, or liable, for loss to another person or another persons property and is required to make financial restitution”
As a welder your husband needs to understand what risks he may be responsible or liable for? What actions might cause harm to another person or their property?
Does he have a shop where he might have customer coming and going? The most common exposure for this is trip and fall. What if someone enters his shop and trips/slips and they hurt themselves? He could be held responsible for their safety and Commercial Liability would cover this.
What is he welding? You need to make sure your quote(s) include coverage for Products & Completed Operations. This would cover his actual “welding” as this is his completed operation.
For example: say your husband welded on a trailer hitch to a truck. The owner of the truck then hooked up their trailer and went on their way. After a few miles the hitch gave way causing the trailer to disconnect from the vehicle wrecking into another vehicle. Later they determined the weld on the trailer hitch was the cause of the accident and your husband gets sued for faulty workmanship.
This could be considered his responsibility and is exactly why you would purchase liability coverage.
Liability is not always clear cut as to what is covered and what is not. Unfortunately often times there is no black or white (what is or is not covered).
Hope this helps and good luck with your business
Brian Hackett on February 3, 2010 at 5:30 pm
Commercial liability does NOT cover tools. Clearly, he has either a contractor’s BOP or commercial package policy, if he’s got liability and tool coverage on the same policy.
The thing is, it’s very, very, very broad a question. What exactly is covered, takes about 40 pages to write up. There should be a POLICY you can read, or the agent you got the quote from, should be able to tell you.
Generally, it does NOT cover workmanship, and it doesn’t cover damage to the part of the building he’s working on.
But if, for example, he caused a fire that burned the whole place down, that would PROBABLY be covered.
again, because business insurance is so highly specific, no one here can tell you EXACTLY what is or isn’t covered, for sure – because none of us have read the policy. So you’ll need to ask your agent.
Brian Hackett on February 3, 2010 at 5:30 pm
Liability for a business falls into one of three general types: Commercial General Liability, Errors and Omissions Liability (aka Professional Liability or Malpractice Liability) and Worker’s Compensation (aka Employer’s Liability). There are many specialty liability products (i.e. Employer’s Practices Liability, Kidnap and Ransom, Liquor Liability, etc) which provide coverage for exposures which are excluded by the main three, however we’ll ignore these coverages for simplicity’s sake plus most wouldn’t apply to your husband’s situation.
Worker’s Compensation is usually a government run program to compensate worker’s for their injuries. This program was created to: a) avoid tying up the courts with a huge number of lawsuits of workers suing their employees for their injuries and b) to allow workers access to funds quickly to avoid them going bankrupt because they can’t work. I can guarantee your broker (BTW why aren’t they explaining all this to you?) did not quote you this coverage, however they may have quoted your husband a coverage called ‘Contingent Employers Liability’ (or something similarly worded coverage) which provides your husband coverage in case one of his employees is injured on the job but for some reason is denied Worker’s Compensation coverage.
Commercial General Liability (CGL) is what was quoted by the insurer. CGL provides coverage to your husband for bodily injuries or property damage to third parties that your husband is liable for due to his business actions. The two most important sections to take away from that last sentence is “bodily injury and property damage” and “liable”. If your husband is not liable for the bodily injury or property damage, then there is no coverage since your husband isn’t obligated to pay, however most CGL policies have a coverage called ‘Medical Payments’ that will cover a third party’s injuries even if your husband is not liable (usually used if the business wants to maintain good will with the customer). This coverage usually has a much smaller limit, usually $2,500 – $5,000.
As with any insurance policy there are exclusions that must be noted. The most commonly found ones on a CGL policy are: no coverage for property being worked on (if your husband was welding and the item he was welding was damaged there would be no coverage, however if other property was damaged by the same action the other property would be covered); no coverage for faulty workmanship (in the example given in the other long winded but poor answer the damage to the trailer hitch would not be covered since it was damaged by faulty workmanship, but the damage to the trailer and to whatever the trailer hit would be covered); no coverage to the insured (if your husband is injured on the job there would be no coverage under CGL as he cannot sue himself, he would need a disability policy). You really should speak to the broker/agent who gave you the quote to go over the other exclusions.
Errors and Omissions is, in reality, a specialty coverage since not every business needs it. This covers certain losses not covered by a CGL policy including economic losses not associated with bodily injury or property damage (i.e. Real estate agent screws up a contract wording costing someone the sale of their property forcing them to sell at a lower price in order to sell. While no bodily injury or property damage has occurred economic loss has occurred); malpractice by medical personnel; poor work done by beauticians, barbers and stylists (bodily injuries would be covered, but giving a movie star a bad haircut which makes them look foolish and cause them to lose a part would not).
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