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The 6 Keys You Must Know About Your Business Insurance

ADVICE AND CONSENT
by Andy Baker, Attorney at Law

As a business owner, you want to protect your biggest asset - your business! That would be your CGL (Commercial General Liability) policy. It is used by virtually every American business. Yet it remains a mystery to business people. These days, claims range from the standard "slip and fall" accident on your business premises, to water damage to another tenant's property caused by your employee's failure to shut off a faucet, among others.

Will your business claim be covered? If there is a lawsuit, will your insurance company defend and indemnify (pay if damages are assessed against your company)? Here are the 6 Keys You Must Know About Your Business Insurance:

Is your Business Over Insured or Under Insured?

It depends - on the needs of your business. Who knows best? Your insurance agent. She or he will know you and your business, and how it can best be protected. Even though an agent works on commission, most are honest and ethical, and will inform you if your business is over insured.

When a Lawsuit or Claim Arises, Will Your Insurance Company Provide You with a Defense?

Your insurance company is required to provide you with a defense if there is any potential that the claim is covered under your policy. It all depends on the type of claim and what claims your policy covers. So the answer to this question is a big MAYBE.

If Your Insurance Company Agrees to Defend Your Business, Will It Do So Unconditionally?

In insurance law "the duty to defend is broader than the duty to indemnify." This means that, depending upon the circumstances, you may get a defense even if it turns out later that no coverage exists, or your insurance company doesn't have to pay for any judgment or settlement. An insurance company "must defend a suit which potentially seeks damages within the coverage of the policy." If there is even a remote possibility that your company will be covered, the insurance company must defend your business. But ... will it do so unconditionally?

Your insurance agent can help you here, but if you want to really be sure (particularly if the insurance company denies your claim), you should consult a lawyer knowledgeable in CGL insurance coverage (like me!)

When a Lawsuit or Claim Arises, Will Your Insurance Company Defend under a "Reservation of the Rights"?

This is a very technical area, but the long and the short of it is, when your insurance company isn't sure if your claim is covered (and believe me, this happens a LOT), it may defend you under what we call a reservation of rights. This means they may later deny your claim, but they're CYA'ing themselves against a bad faith action by you - the company who is paying those insurance premiums! You see, there is an inherent conflict of interest created when an insurance company has a financial interest in a finding that your business is not entitled to coverage under its policy.

When a Lawsuit or Claim Arises, Will Your Insurance Company Deny Both Coverage and the Duty to Defend?

The duty to defend, although broad, is not unlimited. The potential for liability is limited by the nature and kinds of risks covered by the policy. If there is a duty to defend where there is the potential for liability, it follows that an insurance company has no duty to defend an insured when there is no potential for liability under the policy. So if your business trucks are insured, but you make a claim for an airplane problem, there's no way it will be covered (and yes, I've seen this before). If your insurance company denies your claim talk to your agent. Then talk to me.

The Moral of the Story? The Insurance Company is Not Your Friend (But Your Agent Is)!

Insurance companies don't insure your business out of the goodness of their financial heart - they're insuring you to make money. Sometimes they don't act in your best interests. The insurance industry is out to fatten its pockets - not yours. So remember - the insurance company is not your friend...but your own agent is! That's because she or he is a professional, and knows about your business, knows you, and will work with you.