Variety of liability insurance plans can protect businesses

Running a business isn't easy. And, unfortunately, mistakes sometimes happen. When those mistakes can cause harm or damage, that's when business liability insurance is needed.

"In general, you carry liability to cover negligence," says attorney John Cook of Cook, Barkett, Ponder and Wolz in Cape Girardeau.

The first step is to figure out what insurance you need -- it varies widely based on what type of business you have.

"If we're talking retail business, we're talking about dangerous condition of property," Cook says, citing examples like failing to remove ice or snow, leaving spills on a grocery store floor or products falling off shelves. "It gets more complicated when talking about product liability for manufacturers. Then you carry insurance in case your product is defective or dangerous."

Eric Bergmann, commercial lines broker with W.E. Walker-Lakenan LLC, says navigating the different policies can be difficult without an adviser.

"I recommend (a business owner) sit down and talk with an insurance professional to determine which type of policy fits your industry and risk the best," he says. A mentor in your chosen industry can also be a helpful resource, he says.

In addition to basic general liability, Bergmann says some businesses may need professional liability, sometimes called errors and omissions liability or employers liability.

"Professional liability covers errors and omissions, like malpractice insurance," Bergmann says. It protects a business or individual when a professional service is done incorrectly, such as an accountant making a costly error on a client's tax form.

Employers liability provides protection against claims of employees who are seriously injured or made ill at the workplace. It will take care of an employee's medical fee expenses for incidents sustained as a result of a work-related incident. "It's part of a business' workers comp policy, when you're injured for doing something above and beyond the call of duty," Bergmann says.

The various forms of liability insurance provide an umbrella of protection for business owners and may help avoid lawsuits. It is also important to understand what a business is and is not liable for.

"There's a common misperception that a business is automatically liable for injury if it happens at the business," Cook says. "That is not true. A business is only liable if an accident occurs because of something the business did or didn't do."

He also advises the best way for owners to avoid lawsuits: "First, do not act carelessly. The most important thing is to have a safe place of business, engage in safe business practices," Cook says. "If you do that, you're perfectly safe from lawsuits."

__Types of liability insurance__

__General liability insurance:__ Business owners purchase general liability insurance to cover legal hassles due to accident, injuries and claims of negligence. These policies protect against payments as the result of bodily injury, property damage, medical expenses, libel, slander, the cost of defending lawsuits, and settlement bonds or judgments required during an appeal procedure.

__Product liability insurance:__ Companies that manufacture, wholesale, distribute and retail a product may be liable for its safety. Product liability insurance protects against financial loss as a result of a defect product that causes injury or bodily harm. The amount of insurance you should purchase depends on the products you sell or manufacture. A clothing store would have far less risk than a small appliance store, for example.

__Professional liability insurance:__ Business owners providing services should consider having professional liability insurance (also known as errors and omissions insurance). This type of liability coverage protects your business against malpractice, errors, and negligence in provision of services to your customers. Depending on your profession, you may be required by your state government to carry such a policy. For example, physicians are required to purchase malpractice insurance as a condition of practicing in certain states.

Source: U.S. Small Business Administration