You’ve worked hard and your small business is thriving. Now know that complying with your state’s workers’ compensation laws is not enough to shield you or your company from liability for calamities other than employee injuries on the job.
This article will explore the applicability of other types of insurance, from the perspective of a law firm owner and workers’ compensation attorney in Philadelphia, so that you can decide whether your small business needs additional coverage for your potential losses or the losses of third parties.
What Workers’ Compensation Covers
Workers’ compensation shields business owners from liability for the results of workplace accidents. Employee injuries, conditions, and diseases incurred while performing regular work duties are covered by workers’ compensation insurance.
Every state has a workers’ compensation statute mandating coverage for most employers. It is a valuable scheme for employers in that it avoids litigation, preserves the employer-employee relationship, compensates the employee for lost wages, and pays for the medical treatment necessary to help the employee heal and get back to work.
Workers’ compensation does not cover:
- Injuries to independent contractors;
- Injuries on the company’s property to third parties, such as clients, customers, vendors, or passers-by;
- Injuries to third parties by-products the company sells distributes, or produces;
- Injuries to clients by your professional negligence;
- Injuries to third parties in accidents involving the company’s motor vehicles.
“Risky Business” is much more than a movie title. It’s a reality for every small business that is under-insured. A single calamity or lawsuit could easily put you out of business, and depending upon your business structure, render you personally liable for someone’s injuries. This is why you should consider purchasing additional types of coverage.
Why You Might Need Product Liability Insurance
If you make, distribute, or sell a product that is found to be defective, causing injuries to the user, you can be held liable for those injuries. If a product is improperly manufactured, designed, or even marketed and you are in the distribution chain, you can and will be sued. Even if a consumer misuses a product, anyone in the distribution chain may be liable for any resulting damage.
Consumers injured by allegedly-defective products may sue you under the tort theories of strict liability and negligence or under breach of warranty. Consumers who suffered only economic damage may also sue, alleging that the product caused property damage or that the product is not worth what the purchase price was because of its defect.
Service providers are also liable for the quality of their services under product liability theories. Most states have consumer protection laws, such as an unfair and deceptive trade practices act, that prohibit the representation of goods or services of a particular standard, quality, or grade or that goods are of a particular style or model if they are of another standard, quality, or grade. Most statutes of this type provide for recovery of a multiple of the plaintiff’s actual damages, plaintiff’s attorney fees, and in egregious cases, punitive damages.
Why You Might Need Commercial General Liability Insurance
If you welcome clients or customers to your commercial property, or you have vendors or other business partners visit your property, or your property is in any way accessible to the public, commercial general liability insurance will cover any injuries sustained by or on your property.
Commercial general liability insurance covers third-party claims against your business, not your losses.
Why You Might Need Business Interruption Insurance
Although this type of insurance usually comes with many exemptions to coverage – such as a pandemic exemption – it can cover operating expenses, the costs of a move to a temporary location if necessary, rent, payroll, taxes, and loan payments. It may cover you in case of shut-down by civil authority due to, for example, physical damage to your site or a neighboring site from a storm, earthquake, fire, or another calamity, or perhaps in the case of state-ordered shut down due to a virus.
Why You Might Need Professional Liability Insurance
If you offer a professional service, professional liability insurance covers claims of negligence by your clients. In some states, professional liability insurance is required by some practitioners, such as attorneys or doctors.
Why You Might Need Commercial Auto Insurance
If you or your employee drives a vehicle owned by your company, you need commercial auto insurance. Injuries and property damage sustained in an accident with your company-owned vehicle will be covered.
Talk to a commercial insurance agent about the risks your company faces and the types and amounts of coverage you need. Many insurers bundle multiple types of coverage so that your small business can save money on premiums.
About the Author
Veronica Baxter is a legal assistant and blogger living and working in the great city of Philadelphia. She frequently works with Larry Pitt, a workers’ compensation lawyer in Philadelphia.