Business liabilities, like disputes over missed deadlines, perceived errors in deliverables or unclear communication can lead to lawsuits. Defending yourself can become costly.
Understanding the liability risk definition for your industry can help you identify potential legal responsibilities and ensure adequate coverage, like general liability insurance or professional liability insurance.
Your business can face general liability risks during normal operations.
General liability insurance helps cover claims that your business caused bodily injury or property damage to someone else or their belongings.
Professional liability insurance, also known as errors and omissions insurance (E&O insurance), helps cover legal costs and judgments if a client sues your business for any mistakes made during the delivery of professional services.
If your business has contracts, it assumes contractual liability risks to abide by those contracts. That means you will likely need
contractual liability insurance. If your business sells products to customers, you could be at risk of a defect causing injuries or damage to someone else’s property. In this case, you’ll likely need product liability coverage or even business interruption insurance if you have to close temporarily.
There are so many different concerns when running a business, so it’s essential to work with an insurance specialist to define liability risk clearly and understand how it might affect your business operations.
One of the best ways to define liability risk is by example. Consider these events that could lead to costly legal fees or settlements:
- Personal Injury: A competitor accuses you of libel when you publish their poor reviews on your social media. They sue you for damages.
- Errors and Omissions/Negligence: A client claims your bookkeeping company failed to process deposits in a timely manner, costing them significant fines and fees they want to recoup.
- Bodily Injury: A customer slips on an ice patch at the door to your business. They file a claim for medical treatment reimbursement.
- Cyber Event Liability: A hacker gains access to your customer information and steals identities. You are sued for privacy negligence.
- Automobile Liability Risks: One of your employees drives a company vehicle into a store’s pallet of inventory and supplies. The store wants to be reimbursed for their expenses.
If you’re found legally responsible for property damage or personal injury to a third party, you’ll need liability insurance that matches your coverage needs.
While
general liability insurance is part of most home, auto and business insurance packages, an insurance specialist can help determine additional policies for the unique risks of your profession and industry.
Implementing proactive risk and liability exposure strategies can reduce the likelihood of disputes and help you navigate complex situations effectively. Liability and risk management means creating a process for reviewing contracts and offering clear deliverables, having procedures to protect client data, and prioritizing staff training and follow-up to customer complaints or concerns.
An additional step to protect your business from risk is to research insurance solutions designed specifically for your business or professional services firm. Depending on the services you provide, your client may require you to have E&O insurance in case errors in your services cause a third party to sue their business.
