Business Insurance: How You Can Protect Yourself and Secure Coverage.

“I’ve paid thousands in premiums with no claims and when I finally need them they don’t provide coverage.” As an attorney, I hear this frequently from people who are facing a lawsuit and their insurance company has denied coverage.

In the world of business, the standard liability coverage is a General Commercial Liability Policy (“GCL”). These policies provide broad liability coverage for your business, while often simultaneously providing broad exclusions that negate coverage.

The interplay between the coverages and exclusions are deliberately confusing. They want you to feel like you have coverage while also providing substantial wiggle room to avoid coverage when you actually need the coverage you’ve faithfully paid for. The insurance company defends this practice by pointing out that the exclusions are explicitly part of the contract.

Insurance Brokers

Some business owners understand that the insurance companies employ dishonest practices and hire insurance brokers to assist them with procuring coverage. They assume that a broker is an insurance expert and will make sure they have all of the coverage they need. However, it is important to understand that a broker owes you no obligation to make sure your insurance policies are tailored to your business.

A number of court decisions have determined that an insurance broker’s obligations to a client are limited. “The burden is on the customer to initiate, seek and obtain appropriate coverage and, unlike a recipient of the services of a doctor, attorney or architect, the recipient of the services of an insurance broker is not at a substantial disadvantage to question the actions of the provider of services.”

In layman’s terms, the Courts have determined that it is your obligation to understand your business risks and tell your insurance broker the coverages that you need. An insurance broker’s legal obligation to you is to provide you the coverage you asked for. If you simply say, “I need liability coverage for my business” your broker may provide you with GCL policy quotes that are riddled with exclusions and your broker does not even have to explain those exclusions to you.

What can you do?

The first thing you can do is inform yourself about the vulnerabilities that exist in your business that you can insure against. For some businesses this may be a more complicated undertaking than others. For example, a roofer needs to understand liability for contribution and indemnification, the scaffolding law and how those things interplay with workers’ compensation.

The second thing you can do is find a broker that seeks to develop a lasting relationship and provide you with service that goes beyond the bare minimum obligations. Ask questions. Learn more about the coverages and exclusions before you agree to be bound by coverage.

Of course, your attorney’s office is a good first place to start for both of these things. An attorney can make an introduction to a quality broker. In the referral process, the attorney can also inform the broker more about the areas of concern from a liability perspective and make sure those areas of concern are insured against.

Conclusion

I am seeing an alarming trend of people who have worked with brokers to procure insurance coverage for their businesses only to be told that there is no coverage when they actually need it. Do not wait to find yourself in this situation and seek legal help to clean up the mess. The time to seek help from a professional is before you obtain coverage.

If you would like a review of your CGL policy or a better understanding of your business’s areas of concern for liability, feel free to contact our office and schedule an appointment.