Chapter 2: How Insurance Protects Your Agency
Part 1: General Liability Insurance: Basic Liability Protection for Independent Brokers
Because brokers and insurance agents work with the public — usually in an office setting — General Liability Insurance (GL) is an especially important policy. For starters, it covers your legal costs when you are sued over a third party's bodily injuries that happened on your property. (For reference, a "third party" is anyone who doesn't work for your business.) If your office is open to the public, every person who walks through your door is a potential liability.
Other claims that fall under the realm of General Liability's protection include…
- Bodily harm (e.g., a client trips and falls on your premises).
- Property damage (e.g., you accidentally drop and break a client's tablet).
- Personal / advertising injuries (e.g., you inadvertently infringe on someone's copyrights when you post their photo on your business's Facebook page).
General Liability Insurance covers third-party claims over bodily injuries, property damage, and advertising injuries.
Because these claims are usually accident-related (i.e., either unpreventable or caused by an oversight), every small-business owner is wise to carry this policy, no matter their industry. Still, some business owners are more at risk for General Liability claims than others.
When Does General Liability Benefit Your Brokerage?
Here are a few factors that may increase your risk of a General Liability lawsuit:
Renting or Owning an Office
When your business operates out of a physical location, anyone could walk in and potentially hurt themselves — or claim that they did. General Liability Insurance is often called "slip-and-fall" coverage for this very reason.
For example, let's say you're an insurance agent who rents an office in a part of town that gets quite a bit of foot traffic. One day, a group of mischievous teenagers comes into your office. When they notice short staircase leading from the entryway to your office, they decide to slide down the banister. Before you can ask them to leave, one falls off and breaks his arm. His mother ends up suing your business for the miscreant's bodily injury, claiming her son slipped on an over-waxed step.
Working with Clients
General Liability claims typically revolve around damages you can see, such as physical injury and property loss. But business owners can be held liable for non-physical injuries, too. These are called "personal injuries" (aka advertising injuries) and include incidents such as…
- Copyright infringement.
- Privacy invasion.
For example, say you are an L&H insurance agent and you ask a recognizable local business owner to use her picture in a print advertising campaign. She agrees, but when the pamphlets are distributed, she claims that you did not get her explicit written permission to use her likeness for your business's financial gain (which is a form of privacy invasion). She sues for damages.
Running a Home-Based Business
Some brokers prefer to work from home, which may make a GL policy seem like overkill. After all, you have a homeowner's policy with liability coverage. But unfortunately, that may not be enough. Most homeowner's policies — even those with liability protection — exclude coverage for business-related incidents. In other words, if you ever invite clients to your home office, you face the same exposures as any other business owner.
Most homeowner's insurance policies exclude liability protection for business-related incidents.
For example, let's say you are a broker who works out of a home office. One day, a client stops by to finish up some paperwork. Even though your office has a separate entrance, your client insists on taking off her shoes at the door. Meanwhile, your new puppy finds the expensive designer shoes and decides to have a field day. When your client finds the mess, she says she wouldn't have taken the shoes off if she'd known you had a puppy. She demands that your business reimburse her for the $1,300 pair of shoes.
As you can see, General Liability claims don't have to be "legitimate" to end up costing your business money. After all, we live in the most litigious country in the world. According to Above the Law, Americans spend 2.2 percent of the country's gross domestic product (GDP) on tort costs every year. That's about $251 billion on lawsuits!
Americans spend about $251 billion on lawsuits each year.
Luckily, General Liability Insurance ensures you don't go broke trying to bail your business out of a frivolous (or even merited) lawsuit. For covered claims, your policy pays for…
- Your lawyers' fees.
- Medical costs.
- Other court costs.
General Liability premiums vary and are based on the size of your physical office space, your industry, where you live, and your risk profile.
Next: Part 2: Property Insurance for Agents: Safeguarding Your Physical Assets