Lawsuits against big brands flood our news; from someone suing McDonalds for serving scalding hot coffee that caused third degree burns to someone suing Red Bull for not being able to fly after drinking an energy drink. Although some of the lawsuits we hear about have merit, most of them are frivolous. Regardless, the company in question is forced to defend itself and will pay thousands of dollars in attorney fees alone to do so. As a small business owner, have you ever stopped to wonder; “Could something like this happen to my business and if so, how will I afford it?”
If you interact with clients face-to-face, perform a professional service or regularly give advice to clients, the answer is yes. Your small business is at risk for being sued. The good news is that liability insurance can help protect your business and offer you peace of mind. Most professional liability and general liability insurance policies include coverage for defense costs.
What is professional liability insurance?
Professional liability insurance, also called errors and omissions insurance (E & O insurance), protects your business if you are sued for negligently performing your services, even if you haven’t made a mistake.
Read some of the claim examples below to see how professional liability insurance can help protect your small business.
- Technology Business/Consultant
Network security issue: You are hired to review your client’s website and network security in order to implement new procedures where you find weaknesses. A month after you complete the project, your client’s website gets hacked and they lose revenue from the site being down. Your client accuses you of faulty work. Professional liability insurance protects you against claims of negligence even if you haven’t made a mistake.
Project management out of control: You have been contracted by a client to come in and organize a project that has run past its due date and is over budget. You commit to bringing the project to completion. As you dig into the project you realize that the former project manager did not present your client with an accurate view of deliverables and you are facing a scope of work that is twice as long as your original projection. When you present this finding to your client they are angry and accuse you of not doing your due diligence of project review up front before signing the contract. Professional liability insurance protects you against claims of negligence even if you haven’t made a mistake.
- Real Estate Agent
Buyer’s remorse: With the continued decline of property values, clients may blame you for feeling like they overpaid for their new home. You could face a claim that you were negligent in researching the home’s value. Professional liability insurance will protect you even if you haven’t made this mistake and the allegations are groundless.
What is general liability insurance?
General liability insurance protects your business against claims of bodily injury, associated medical costs and damage to someone else’s property.
Read some of the claim examples below to see how general liability insurance can help protect your small business.
- Graphic/Web Designer:
Property damage: You’re visiting your clients’ office for a design meeting and you accidentally spill coffee on your client’s computer, damaging it beyond repair. General liability insurance will cover a claim that may arise, up to your limits of liability.
Personal injury: One of your employees is on a job site. He talks to the contractor about one of your mutual clients in a false and unflattering way. The client learns of this discussion and sues for slander. General liability insurance will cover the subsequent claim, up to the limits of liability, and pay for an attorney to defend you if necessary.
- Marketing Consultant
Bodily injury: As a marketing professional, you often find yourself at trade shows setting up booths which involves running cables for electricity to support the lights and computers used in the demonstration. Your set up can create a high risk environment for trips and falls. General liability insurance protects you against third-party claims for bodily injury and related medical costs.
Make sure your business is protected. AMAC is pleased to be working with Hiscox, which specializes in insurance for small businesses in industries like consulting, design, IT, real estate, beauty, fitness and more.
Having both general and professional liability insurance coverage puts your small business is in the best possible position for those unforeseen accidents and lawsuits. Make sure your business is properly protected.
The contents of this article and the linked materials do not offer legal, business, or insurance advice related to the needs of any specific individual business. This information is provided to assist in understanding the coverage offered and does not modify any insurance policy, nor does it imply that any claim is covered. Small business insurance underwritten by Hiscox Insurance Company Inc., a Chicago based insurance company that is rate A (Excellent) by A.M. Best. Coverage is subject to underwriting, terms, conditions, and limits of the policy, and is not available in all states.