General liability insurance is a critical safeguard for businesses, but it has its limitations. Understanding what this policy doesn’t cover is essential to avoid potential financial pitfalls. Here’s a detailed breakdown:
1. Employee Injuries
General liability insurance does not cover injuries or illnesses suffered by employees while working. Such claims are typically handled under workers’ compensation insurance.
Example:
- If an employee slips and falls at work, the costs of medical treatment or lost wages would not be covered by general liability insurance.
2. Professional Errors or Negligence
Mistakes, errors, or negligence in professional services are not covered. Businesses offering advisory, consulting, or technical services require professional liability insurance (also known as errors and omissions insurance).
Example:
- A consultant provides incorrect advice leading to financial losses for a client. This claim would not fall under general liability insurance.
3. Intentional Acts or Illegal Activities
Any harm caused by intentional actions, fraud, or illegal activities is excluded. Insurance policies are designed to cover accidental incidents, not deliberate misconduct.
Example:
- A business owner intentionally damages a competitor’s property. This would not be covered.
4. Property Owned by the Business
Damage to the business’s own property or equipment is not covered under general liability insurance. To protect such assets, businesses need commercial property insurance.
Example:
- A fire destroys your office furniture and computers. General liability won’t cover the replacement costs.
5. Auto Accidents Involving Company Vehicles
General liability insurance excludes vehicle-related claims. Businesses require commercial auto insurance to cover accidents involving company-owned vehicles.
Example:
- A delivery van owned by your business is involved in an accident. Repairs and liability costs must be covered under a separate commercial auto policy.
6. Product-Related Issues
General liability insurance typically excludes claims related to defective products causing harm. Such claims fall under product liability insurance.
Example:
- A faulty product sold by your company injures a customer. This is not covered by general liability insurance.
7. Damage From Professional Work
If a contractor’s work leads to damage, general liability may exclude coverage, especially after project completion. This is often addressed through a contractor’s professional liability policy.
Example:
- A roofing contractor’s improperly installed roof leaks after a storm. Repair costs would not be covered.
8. Cybersecurity Incidents
Cyberattacks or data breaches affecting your business are not covered under general liability insurance. Businesses need cyber liability insurance for such events.
Example:
- Customer data is stolen during a cyberattack. General liability will not cover legal fees or notification costs.
Conclusion
While general liability insurance provides essential protection against third-party claims, it’s crucial to understand its exclusions. Supplementing your coverage with specialized policies ensures comprehensive protection for your business.
Take Action: Consult with an insurance advisor to evaluate your business needs and obtain appropriate coverage for potential gaps.
