Legal defense costs
Even if a lawsuit is baseless, defending your business in court isn’t cheap. Depending on circumstances, commercial general liability insurance could help with:
- Attorney fees. Hiring a lawyer can average $327 an hour, depending on their experience and specialty.
- Court costs and filing fees. Lawsuits can last months or sometimes years. Courts charge fees for filing motions, depositions and accessing legal documents.
- Investigation costs. These include costs for background checks, surveillance footage retrieval or interviewing witnesses.
- Mediation and arbitration fees. Many lawsuits are settled out of court through mediation (informal negotiation) or arbitration (formal resolution process).
Settlements and judgments
General liability coverage could help business owners cover the costs of legal negotiations, such as mediation or arbitration, to try to avoid a costly and time-consuming trial.
Insurance companies will often handle out-of-court negotiations, and aim for a fair resolution that minimizes financial loss.
Bodily injury to others
You could face a lawsuit if someone suffers bodily injury — a slip-and-fall, tripping incident, etc. — on your business property. Bodily injury lawsuits can be expensive. Your business could find itself saddled with the cost of someone else’s medical bills, lost wages and pain and suffering.
While it may be more common to see headlines about physical injuries involving enterprise businesses, small businesses face the same risks. Even if the injury wasn’t your fault, you might still need to defend your business in court, which can drain your energy, time and dollars.
Lawsuits for someone else’s property damage
If you or your employees knock over a client’s expensive vase, or a pressure washer damages a seagull-excrement-stained roof, property damage lawsuits can be costly.** If your business accidentally damages someone else’s property, you could be held financially responsible.
A general liability policy could help small business owners pay for some repair or replacement costs. This is especially important for businesses that work on-site at clients’ properties, like contractors, cleaners and repair services.
Personal and advertising injury lawsuits
Lawsuits aren’t always about physical injury or damage. Your business can also be sued for intangible damages, such as personal and advertising injuries like defamation (libel and slander), copyright infringement in your advertising, invasion of privacy or false advertising.
If another business or individual claims your marketing, branding, or statements harmed their reputation or violated their intellectual property rights, you could face legal action.
For instance, the American Society of Composers, Authors and Publishers (ASCAP) filed lawsuits against several bars and restaurants for playing copyrighted music illegally. Businesses now must get a license and permission to play the music of the songwriters and artists the ASCAP represents.
Legal disputes over marketing content or business communications can be financially devastating without protection. General liability coverage can help safeguard your business if these unexpected liability claims arise.
Types of lawsuits General Liability insurance probably won’t cover
Although there is not a blanket “lawsuit insurance for business” policy, a well-rounded insurance package can help cover different types of litigious actions against you. General liability can help cover a lot of your legal risk, but it isn’t the only type of policy with lawsuit protections.
Here’s what your general liability policy probably doesn’t cover:
- Employee injuries. If an employee gets hurt on the job, that’s what workers’ compensation insurance is for. Workers’ comp also offers some legal protections for employers. This policy prevents employees from suing employers for damages related to the injury or illness, including medical expenses or lost wages.
- Professional errors and negligence. Lawsuits based on business errors or professional negligence, such as incorrect advice, missed deadlines or misinformation in your professional services, would fall under professional liability insurance, also known as errors & omissions insurance, depending on your industry. Your general liability coverage won’t usually help you in these situations.
- Intentional or criminal acts. If a lawsuit is brought against you that stems from fraud, assault or intentional harm, general liability — or any kind of business insurance, really, won’t cover it.
- Accidents involving business vehicles. General liability insurance doesn’t extend to accidents involving company-owned or business-use vehicles. If your business owns vehicles or employees drive for work, commercial auto insurance would be the right tool to cover business liabilities like accidents or vehicle damage.
- Damage to your own property. If you’re the one bringing the lawsuit because of damage to your own property, such as your work building, business furniture, fixtures, products or inventory, commercial property insurance could help you. General liability covers damage to property you don’t own, not damages to your own business assets.
