Chapter 7: Insurance Coverage
Chapter 7 of my journal, Don’t Get Sued! A Guide to Help Reduce Your Business’s Exposure to Lawsuits, which deals with insurance coverage, begins with the next paragraph. The Introduction, plus the previous six chapters are covered in older blogs.
Just a word or two on insurance coverage. It’s very important that your business have coverage that protects itself. By protect, I really mean to defend and indemnify. Defense of your business by your insurer is not optional. If you have coverage for the type of loss which occurs, the carrier has a duty to defend their insured. Defense means to handle the claim for you from start to finish. If the carrier deems the claim to have merit and value, the claim may be settled by an insurance adjuster prior to the filing of a lawsuit by the plaintiff. If a lawsuit is filed, the insurance company will be responsible for providing an attorney to file an answer to the plaintiff’s complaint, and handle all the litigation related matters through final resolution of the case. The cost for a business to pay for it’s legal defense without insurance coverage would likely put the vast majority of small businesses out of business. Therefore, be sure to have appropriate coverage. To keep the cost down, consider a higher deductible (but one you can afford if the need arises).
You may also wish to consider purchasing medical payment coverage (med-pay). Such coverage will pay the medical expenses of someone injured on your property, usually up to $1,000.00. The coverage does not typically extend to employees, as in theory they have worker’s compensation coverage available. The cost of such coverage is typically fairly nominal and it often placates claimants just enough to prevent them from hiring an attorney and pursuing the matter further. Often, if the claimants get their medical expenses paid by the establishment that they feel was responsible for their injuries, they feel as if justice was served.
Finally, look into buying an umbrella policy. These types of policies protect the insured from claims of negligence, as well as other claims, usually up to $1,000,000.00, which is likely to exceed other coverage that you have. The cost of this type of policy is usually only a few hundred dollars annually. Just be sure the coverage kicks in for claims against your business. However, even if it doesn’t, you should consider the coverage, as it protects you personally in case a lawsuit against your business pierces the corporate veil.