3 questions on business liability insurance
You've taken out liability insurance to protect your business against accidents and other problems you might encounter on a daily basis. But do you know what your insurance actually includes? Read on for a closer look at what's covered, what's not covered and how it's different from professional liability insurance.
What does business liability insurance cover?
Liability coverage protects your business in the event of claims or legal action from third parties who have suffered bodily injury, property damage or other accidental harm.
It could cover any legal costs you incur if you're sued and compensation for the complainant if your business is held liable for damages or harm, as long as the claim is covered under your policy. Your coverage applies to all the different parts of your business, including your premises, products, services and operations. When does it come in handy? Here are some real-world examples.
Management consulting firm
Imagine you own a management consulting firm and you've set up a meeting with a client at your office. They fall down the stairs and are seriously injured. In fact, they develop a permanent disability and are unable to continue working as an electrician. They sue for $600,000 based on their injuries and loss of future income. In this scenario, your business liability insurance could cover your legal costs and any compensation you need to pay out.
Your commercial cleaning company provides janitorial services at a pharmacy during off hours. One of your employees goes to the maintenance room to get a mop and bucket. In doing so, they accidentally snag an electrical circuit breaker, cutting off power to a fridge that contains $40,000 worth of vaccines and medicines. The entire contents of the fridge are a write-off. Luckily, you have liability coverage, so your insurer will negotiate a settlement with the pharmacy owner.
What's professional liability insurance?
Professional liability insurance (also called "errors and omissions insurance") protects your business against any errors, omissions or negligence that may occur as part of your operations. People make mistakes, but it's hard to know whether a disgruntled client is going to file a suit alleging professional negligence or error. This insurance covers certain legal fees in the event of a claim or lawsuit. You also get personalized support from Desjardins Business Insurance. Here are some situations where the right coverage really comes in handy1.
An employee at a bookkeeping firm takes on a client and forgets to put the invoices the client needs to pay on their books. As a result, the client stops paying their suppliers. Sometime later, the client discovers that a number of suppliers have stopped providing their services, which shuts down operations for several days. The client sues the bookkeeping firm for lost revenue caused by the shutdown. In this situation, general liability could cover defense costs and indemnity, if applicable.
A regular customer goes in for her monthly hair colour appointment. She and her stylist talk it over, and the stylist decides to try something new by changing up the colour. A few minutes after the stylist applies the dye, the customer notices a burning sensation. The stylist realizes that the scalp has been severely burned by the bleaching process. If the hairdresser has professional liability insurance, it could cover the costs of any potential lawsuit.
Why is liability coverage mandatory for condo syndicate directors and officers?
In fulfilling their role, directors and officers of condo syndicates can sometimes make errors for which they are liable. This form of liability insurance covers financial losses resulting from malpractice or breach of obligation committed by directors and officers of a condominium building as part of their duties. This coverage has been mandatory for condominium properties since 2021.
For example, say the syndicate's governing documents state that condo owners aren't allowed to have a BBQ on their balcony. The syndicate doesn't enforce the rule, and a condo owner's BBQ explodes and damages the neighbouring units. The insurers for the owners affected by the explosion sue the syndicate. Liability insurance for condo syndicate directors and officers would cover any financial losses resulting from malpractice or breach of obligation.
No matter how careful you are, there's no such thing as zero risk. That's why having the right coverage can give you peace of mind in the event of a lawsuit. With Desjardins Insurance, you get personalized service from an insurer who cares about business owners, along with free legal assistance and business concierge service. You can also get up to 5% in savings when you bundle your insurance for your business and commercial vehicles.
Get insurance that puts your business first
Learn more about business insurance: https://www.desjardins.com/en/business/tips/business-insurance-protecting-your-sme.html
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1 The situations presented are fictitious examples and are provided for illustrative purposes only.
Desjardins Insurance refers to Desjardins General Insurance Inc., provider of home, auto and business insurance products. These tips are provided for information and prevention purposes only. They are general in nature, and Desjardins Insurance cannot be held liable for them. We recommend using caution and consulting a property and casualty insurance agent for comprehensive, tailored advice. Certain conditions, limitations and exclusions may apply. The terms and conditions of the coverages described are set out in the insurance policy, which always prevails. Desjardins®, Desjardins Insurance®, all trademarks containing the word Desjardins, as well as related logos are trademarks of the Fédération des caisses Desjardins du Québec, used under licence.