small business liability insurance

For small businesses, including those in the hospitality sector such as restaurants and limited-service hotels, liability insurance is critical in protecting their assets against lawsuits that can arise from guests and other third parties. Small business liability insurance (Commercial General Liability/CGL) provides coverage for third-party claims of bodily injury and property damage, and pays for the cost of obtaining legal defense as well as any settlement made or judgment rendered up to the policy limit. Under a Commercial General Liability policy, small businesses are also covered for libel, slander, or copyright violation.

Under the Cover of A Commercial Umbrella Policy

Many small businesses don’t have the assets that their larger counterparts do to withstand a major loss. Most owners, in fact, put their own finances at risk, particularly partnerships and sole proprietorships. Even under an LLC structure, an owner may still be exposed to personal risk. In addition, about 75% of small businesses are underinsured, according to studies. One catastrophic liability loss would put a small operation out of business and jeopardize an owner’s personal assets.

For example, imagine a patron at the neighborhood restaurant slipping on a wet floor and becoming severely injured or, after dinner and a few drinks, getting into a car and causing a fatal accident. Or, a businesswoman staying at a small hotel assaulted in the parking lot. These types of incidents have occurred and resulted in multi-million-dollar lawsuits.  

To address the exposure to large lawsuits, a small business liability insurance program should also include an Umbrella policy to pick up where the CGL leaves off in the event of a catastrophic incident that could stop an operation in its tracks. Umbrella insurance, with limits available from $5 million on up, will step in after the Commercial General Liability policy amounts are exhausted for a covered claim.

A small business liability insurance program should also include an Umbrella policy to pick up where a Commercial General Liability policy left off in the event of a catastrophic incident that could stop an operation in its tracks. For example, imagine a patron at the neighborhood restaurant slipping on a wet floor and becoming severely injured or, after dinner and a few drinks, getting into a car and causing a fatal accident. These types of incidents could result in multi-million-dollar lawsuits.  

The limits on a CGL policy will likely not be enough to adequately respond to such lawsuits. Umbrella insurance, with limits available from $5 million on up, will step in after the CGL policy amounts are exhausted for a covered claim.

The Value of Crisis Management Coverage with An Umbrella

Umbrella insurance can also provide crisis response coverage, which helps cover public relations costs to mitigate the potential reputational damage that can result in the aftermath of a serious liability loss. With this coverage, the small business can contract with a crisis service provider for immediate assistance and receive funding for related expenses,
manage media scrutiny, and preserve public confidence and trust.

It’s important for businesses to understand their exposures and the need for a comprehensive small business liability insurance solution that also includes Umbrella coverage.