Liability Insurance
liability insurance
Today you are a marketing wizard with a product your customers will kill for and tell their friends about, with employees who are the envy of your industry, with ever-increasing revenues.
And tomorrow, you’re out of business, drained of all your assets, and possibly even facing personal bankruptcy. What happened? You failed to get liability insurance.
Stupid? You bet it is. Especially in today’s super litigious societies where many unethical customers seek the easy road to riches, through a claim against your company for some damages that their lawyers have convinced a judge you should be held responsible.
WHAT IS LIABILITY INSURANCE?
What exactly does this insurance give you?
Two things, basically: protection against claimants who bring a suit against you; and, secondly, financial resources to pay out claims should you admit liability or a court assigns culpability and awards monetary damages to a person who brings a suit against you.
Of course, your insurance company will be very strict in its interpretation of its liability. Not all liability claims made against you will be necessarily covered by your policy.
If your insurance company decides a claim is covered under your liability insurance policy, it will then respond to the claimant’s attorneys and usually try to work out a negotiated settlement outside the courtroom. Sometimes, that avenue proves unworkable. In that case, a lawsuit is typically initiated. At that point, your insurance company’s attorneys will do battle with the claimant’s attorneys and a judge or jury will determine if you are liable for the claimant’s demands.
TYPES OF LIABILITY INSURANCE
One large class of people who purchase liability insurance is automobile owners. In some instances, state law requires that drivers have this insurance because of the large number of automobile injuries and deaths. The state mandates that drivers have minimum insurance coverage to cover possible claims.
Manufacturers of all sorts typically purchase large liability insurance coverage as well since their products are widely distributed and the potential for a claim is large and widespread.
Class action suits against manufacturers are more and more prevalent today. Recall the large awards a few years back mandated by the courts against cigarette manufacturers. It’s highly likely those companies had liability insurance to pay at least a part of those huge awards.
WHAT DOES IT COST?
Costs vary widely and are influenced by the nature of the risk the insurance companies will assume, the likelihood of claims, and other variables. Although it might be too expensive to cover all possibilities, you need to very carefully assess your potential for claims and lawsuits. Often it pays to consult with an insurance liability expert to advise you of the exact coverage you may need. See an expert; get referrals and look for them to advise you of your best approach to covering yourself and your business.
Whatever the cost, you cannot afford to be without coverage. At the end of the day, a perfect product, brilliant marketing, customer service, and a stellar reputation can all be wiped out by one large claim. Don’t take that chance.