A Commercial General Liability (CGL) Policy provides coverage for, among other things, bodily injury and property damage for which the Named Insured is legally liable. This legal liability can result from the Named Insured’s operations. It can also result from the operations of subcontractors hired by the Named Insured.
Accidents happen. So often, in fact, that we have a phrase that basically allows us to try and convince ourselves that it’s okay. We try and rationalize it to ourselves: “Hey, this accident just happened, and it was totally not my fault, so I’m going to say this in order to try and make this other person not feel.” Or you perhaps even, “That accident was totally my fault… I didn’t mean to hit that support on the deck with a sledgehammer… but accidents happen!” Either way, accidents do happen, and when they come up it pays to have them covered, which is where general liability coverage and errors and omissions coverage can help.
General liability is there for those unexpected accidents that occur on your business premises. Whether someone falls down the stairs, a customer damages his car in your parking lot, or even if someone believes you have slandered or defamed their character; general liability has got you covered.
If you are a contractor working on a job, and one of your employees falls from a ladder and lands on top of a third party (a neighbor walking his dog, for example), and the third party is hurt in the collision, general liability will cover the injured person’s medical care. It also covers you if one of your employees accidentally smashes a sledgehammer through a wall that was not supposed to be a part of the kitchen re-model.
Errors and Omissions insurance covers those professionals that act as consultants or give specialized advice or care. When they give bad advice, a customer could come back and sue them for damages. However, errors and omissions insurance protects them from having to take care of the litigation and settlements out of pocket.
Contractors who are consulting on a project (accountants, financial planners, interior designers and landscape architects) should more than likely have errors and omissions insurance. Suppose that you are a landscape architect doing a job, and you decide not to get rid of a gigantic willow tree on the property that’s leaning a little bit too close to the house. Next week, when it winds up crashing through your client’s living room, they’ll be looking for someone to blame. Errors and omissions insurance will lower your liability risks and protect you from unnecessary litigation.
A lot can go wrong on a construction site, and the better coverage you have the less you will have to worry about accidents when you are on the job. General liability insurance and errors and omissions insurance can help limit your losses and the risk of serious lawsuits that could damage the future of your company.
Comparing Excess Liability vs Umbrella Policy
If you thought that umbrella insurance and excess liability insurance were the same thing, think again. While they’re both meant to serve a similar purpose – increasing your liability limit on your existing general liability policy – the ways they work are a bit different. There are a number of reasons that a company may need umbrella or excessive liability insurance. Some of these include:
• When the company expands due to a merger or internal growth, and the existing insurance policy doesn’t cover the full extent of the company’s larger exposure to liabilities
• When the company is involved in a major court case, in which a jury verdict or appellate court decision requires them to increase their liability limits
• When upper management is changed, and the new management decides the company should have more liability coverage
• When the company asks their insurance provider for a higher liability limit, and the insurance company offers an umbrella policy or excess liability policy in addition to the pre-existing underlying liability coverage instead
The term “umbrella” liability coverage is a metaphor for the actual function of the policy. By providing an additional increase to the liability limits of an existing policy, it is, in effect, acting as an umbrella to cover the existing policy from liability outside the existing policy’s limits. One of the biggest benefits of an umbrella policy is that it can sometimes provide additional coverage that wasn’t available as an option in the underlying policy. These policies broaden the scope of business insurance liability in order to close the gaps in coverage.
Excess liability also provides support that increases the limits of liability in a business insurance policy, but the terms of the coverage are more strictly structured. An excess liability policy will increase the per person/per occurrence limits of your existing policy. When a company takes out an excess liability policy, it is explicitly linked to the general liability policy that it’s supporting. This means that it uses all of the same terminology, including definitions and limitations, of the underlying policy. Also, it does not have any effect on any other insurance policies that the business may have. Due to its more restrictive limitations, excess liability coverage is sometimes not the best options, as it may actually wind up being more restrictive than the underlying policy. That’s why it’s important to always read the fine print and ask as many questions as necessary before signing up for any policies.
When you’re trying to decide on an insurance policy to extend your liability limits, and you’re looking at excess liability vs umbrella insurance, it’s a good idea to get in touch with a knowledgeable insurance professional who can help you assess your individual needs. Request a quote today to speak with a representative who can help!