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Your Business Insurance Minefield

This is the final article in our series about insurance coverage. In the first article we discussed the general principles of insurance coverage, and in the second article we described the common features of a commercial general liability policy. However, businesses are not protected with just a general liability policy. Other types of insurance are necessary and should be discussed with either your legal council or your insurance agent.

The most common type of insurance businesses purchase is workers' compensation. In the early 1900's, various states decided it would be beneficial for employees to have a scheduled set of benefits, should they be injured on the job. The tradeoff was the employee could no longer sue the employer in court, and workers' compensation would function as "no fault". The employee can recover for injuries according to a schedule of benefits, even if the accident or injury was caused by the employee's own negligence. General liability policies contain an "employee exclusion." Therefore, coverage is found in a separate workers' compensation policy, which is required because it covers damages set forth by state statutes.

Another type of insurance typically purchased is to protect directors and officers from losses from claims made against them in their official capacity in a corporate, professional or charitable organization. Sometimes, the liability coverage of a D&O policy directly covers the directors and officers involved or in other instances, it is provided through the corporation or organization, which indemnifies its directors and officers.

For professionals, errors and omissions coverage (E&O) is available. E&O coverage is sold to attorneys, doctors, dentists, insurance agents, real estate agents, accountants, design professionals, home inspectors, and other professionals. These policies cover error in professional judgment that result in economic losses.

Available to some businesses are policies that provide coverage for employment-related claims. These can include employee dismissal, discrimination, employee benefit errors, fiduciary (401k) bonds and other employer/employee coverage.

Property coverage, as part of a business owner's package or as a stand-alone policy, may also be purchased. This is to protect the real or personal property they own, or to protect their landlord's property. These policies contain provisions for loss of computer data, loss of business income, reconstruction of records, valuable papers and other sophisticated losses that you and your agent should discuss.

One of the mistakes many business owners make is to assume that a claim is not subject to coverage under any of the policies issued to the business. Failure to submit a claim to your insurer, or at least considering doing so, may result in not utilizing the coverage you have purchased or a claim being denied because of late notice. A careful analysis of the claim, all of its features, and all of your policies should be made in order to protect your rights as a business owner/operator to take advantage of coverages you have purchased.

If you have any questions regarding insurance coverage, please contact Scott Richardson at either sjr@jaburgwilk.com or 602-248-1012.

About the author: Scott Richardson is a seasoned litigator who assists businesses with insurance coverage and works closely with the pest control industry.