General liability policies contain provisions that are particularly important to business owners.
Medical Payments
Coverage for medical payments to claimants is generally included in a policy. This coverage addresses medical expenses for bodily injury to a third party that result from business operations, but unlike the other coverages, medical payments for covered expenses are made regardless of fault and without a lawsuit having to be filed. Some businesses set a relatively high limit for medical payments to allow the insurer to quickly resolve small claims, however, submitting multiple claims can adversely affect the company’s claims history.
Products-Completed Operations
Products-completed operations coverage covers any product manufactured, sold or distributed by a business which generates legal liability by causing bodily injury or property damage. For example, a roof that is negligently installed – a “completed operation” - could leak at some point after installation and cause property damage. Such risks are covered by the products completed operations hazard provision under certain conditions; to be covered when a product is involved, the injury or damage must occur away from the insured’s own premises unless the insured business includes the selling, handling or distribution of the product for consumption on the insured’s premises. “Property damage” with respect to completed operations coverage means physical damage to tangible property or the loss of use of that property. Intangible property would not be covered.
Fire Liability Exposure
Business liability policies cover fire liability risk, which applies if a fire caused by the policyholder’s negligence burns rented premises or other property belonging to the landlord. Coverage is determined by the risk exposure of the business.
Coverage Conditions
Damage to property or bodily injury are covered by a general liability policy when the damage or injury is caused by an occurrence, happens within the coverage territory and takes place during the policy period. An “occurrence” is commonly defined as “an accident, including continuous or repeated exposure to substantially the same harmful conditions.” An event that causes unintended injury to the body, property, person or reputation of a third party is an accident. The insurance also covers situations during which harm occurred as part of an ongoing situation, such as a medical condition that develops because of environmental pollution. Coverage territory is generally confined to the U.S., its territories and possessions, Puerto Rico and Canada, but can extend to international waters and airspace and anywhere in the world under defined conditions. The policy period is defined by the beginning and ending coverage dates as stated in the policy and generally covers bodily injury or property damage that the insured came to know about within the policy period. Coverage will be provided for personal and advertising injury if the offense took place during the defined time period. If the injury or property damage that was reported to the insurer during the policy period develops further the coverage will usually extend beyond the policy period.
Policy Limits
Liability coverage and medical expenses limits and how they are applied are spelled out in the policy, which sets the maximum amounts the insurer will pay for either (1) all damages because of all bodily injuries, property damage and medical expenses arising out of any one occurrence; or, (2) personal and advertising injury sustained by any one person or organization. Policies set aggregate limits that apply when more than one occurrence results in injury or damage; such limits are often defined in relation to other limits. For example, in some policies, the maximum the insurer will pay for all bodily injury and property damages that result from the products-completed operations hazard is twice the liability and medical expenses limit. The most the insurer might pay for all bodily injury and property damages resulting from multiple occurrences (other than those included under the products completed operations hazard), plus medical expenses, plus all covered personal and advertising injury, might be twice the liability and medical expenses limit.
Exclusions
Because of their specialized nature, general liability policies carry several exclusions. For example, injuries to employees are excluded because they are usually addressed by workers’ compensation insurance; pollution or professional services liability may be excluded because only certain types of businesses need the coverage; and, auto liability and damage to the policyholder’s own property are likely to be covered by other policies. Generally, liability policies do not provide protection for impaired property due to a suspected defect, deficiency, inadequacy or dangerous condition, or recall of products; however, product withdrawal expense coverage might be available under an endorsement.
Endorsements
General liability policies usually contain several endorsements. An “Employment Practices Liability Endorsement” protects the business owner from claims of violations of federal, state and local antidiscrimination statutes. The policyholder chooses the limits and deductible for this coverage, and various conditions apply to the settlement of employment practices claims. A “Liquor Liability Endorsement” addresses alcohol-related property damage or bodily injury for which the insured might be held liable, including contributing to the intoxication of any person, violating liquor distribution laws or providing alcohol to an underage person. The business can purchase an “Employee Benefits Liability Endorsement” to protect executives of companies against claims of alleged errors, omissions or breach of fiduciary duty related to employee benefit plans.