How Does Small Business Liability Insurance Work to Protect Your Business?
Do you face small business liability insurance claims? Call or text 800-929-1725 for an appointment. Wadler, Perches, Hundl & Kerlick has five offices in Wharton County, Fort Bend County, and Matagorda County, to serve clients from all over Southeast Texas.
In this video, Attorney and Shareholder Ray Kerlick talks about how your small business liability insurance policy can protect your business from claims. If you have questions about your situation, please call us for an appointment. The attorneys of Wadler, Perches, Hundl & Kerlick have many years of experience defending small businesses against claims and specifically, helping with small business liability insurance claims.
This is a summary of the video about small business liability insurance claims.
– Hello. My name is Ray Kerlick. I’m a partner at the law firm of Wadler Perches Hundl & Kerlick. I’m here today to talk a little bit about small business liability insurance policies and some of the different benefits that are provided to you as an insurance policyholder, specifically, a comprehensive general liability or CGL policy. For those of you who operate small businesses, this is potentially one of the most important assets you have in your portfolio.
A CGL Policy Provides Two Benefits in Facing Business Liability Insurance Claims
A CGL or comprehensive general liability policy provides the insured, which is typically you or your business, with at least two benefits. One is indemnity, and the other is defense. Those are two important terms that I’d like to talk about in a little bit of depth today. But perhaps most important is knowing that if you have a comprehensive general liability policy that you’ll need to notify your insurer, typically through your agent, of any potential claims, and certainly of any lawsuits as promptly as possible.
That allows the insurance company to provide you with an attorney at their cost to defend you from that lawsuit. So, let’s talk a little bit about the types of issues that arise when you’ve been sued as a small business owner, and you’ve turned in this claim to your insurance company.
A Letter is Usually Your First Notice of a Business Liability Insurance Claim
Typically, you will receive as a first notice of the claim, some type of written letter. Normally, this would be from an attorney, but it may be from another business owner or an individual.
When you have notice that someone is threatening some type of claim or lawsuit against you, the best thing to do is immediately notify your agent of that claim. Send them something in writing that confirms when the claim was made, and when the alleged date of the incident about which they’re complaining occurred.
This is important because all policies have terms, and that term is an insurable period during which the policy is applicable. Most CGL policies are what we call Occurrence Policies. And what that means is, if there is an occurrence during the timeframe for which you’re covered, that policy will provide coverage. If the occurrence happened either before or after that term, there will be no coverage.
Notify All Potentially Applicable Insurance Companies of Your Claim as Soon as Possible
So the best idea is always to notify as many potentially applicable insurance policies as possible because, in the final analysis, it’s never always clear exactly when the claim is alleged to have happened, and what you don’t want to do is waive any rights that you may have in your insurance policy.
Again, typically what will happen is the insurance company will provide you with some information about the coverage and a confirmation that they have received the claim. They won’t immediately notify you whether or not the claim is covered. Typically, that will take several weeks. But potentially if there is a lawsuit on file, what will happen is that you will have an attorney file what’s called an answer for you, basically, to protect your rights against the lawsuit.
Most times that’s included within the defense section of the CGL policy. The insurance company not only has the obligation to cover any potentially covered claims that you have made against you but also to pay for your attorney’s fees in defending yourself against those claims. And with a great many claims, that’s potentially the most expensive part of the claim is paying the attorneys to defend it. So this defense obligation is very important.
Expect to Receive a Reservation of Rights Letter from Your Insurance Company
As the next step of most insurance claims involving lawsuits, the insurance company will issue something called a Reservation of Rights letter. What that is is basically a letter that says, here are the reasons that this claim may not be covered, and those will include anything from the timeframe involved to the types of claims that are made.
For example, intentional acts are typically not covered by insurance. So they may raise the issue that something that’s been alleged is potentially an intentional act. But they will agree to defend you in this case, subject to reserving all rights they have to later disclaim coverage.
There’s nothing wrong with this and in fact, the law specifically allows this. However, you may have, as an insurance policyholder, certain rights to select your counsel if, in fact, the insurance company is reserving its rights in this situation.
In the past, we have worked with different company owners, and we certainly work with lots of insurance companies, and actually bridging that gap during the timeframe between when there’s the first notice of a claim until the insurance company has made a final decision on coverage, where we can actually provide you with legal services, assist you in keeping the lawsuit at bay until that decision is made. And typically we can work something out with the insurance company to cover our portion of those bills and those invoices.
Three Essential Points in Responding to Business Insurance Claims
So, again, important points to remember, notice is key. Once you have notice of a claim, make sure you notify your agent. And again, make sure that the agent knows that he should contact as many potentially responsible insurance policy insurers as possible. The second key is to make sure that you’re familiar with what type of coverage you have. If you’ve got a comprehensive general liability coverage, you need to know what the terms are, who the carriers are, and which agent you purchased that policy from so if there is an issue, you can make that notice in a timely fashion and make sure it gets to the right people. Oftentimes, it will require being sent to more than one agent. Finally, understand that the insurance company can and probably will reserve some of its rights to represent you in a lawsuit involving insurance coverage. There’s nothing wrong or sorted about this. This is simply the way the world works.
If You Receive Correspondence from Your Insurance Company, Let Your Attorney Help You Understand It
If you are faced with a situation in which you receive some correspondence from the insurance company, you should not review this or analyze it on your own. This is a legal document with legal ramifications. You should, and are entitled to go and speak to an attorney of your choosing to discuss what your options are concerning negotiating and handling this claim with your insurance company. These are technical documents, and very often an insurance policy has very, very technical provisions, which typically do require legal analysis. This is a situation in which a layperson typically is not qualified to handle things on their own. And again, I think it’s typically not in your best interest to assume that the insurance company is also looking out for you. That’s normally not the way it works.
So in a situation like this, please feel free to contact our office or a lawyer of your choosing to discuss what your options might be concerning any correspondence you receive from the insurance company. Preserve your rights, contact an attorney of your choosing, and again, make sure you put everybody on notice that you need to of problems that you may have moving forward. Thanks for your time.
We are not your typical small-town law firm. Several of our Shareholders have large law firm experience, but we work hard to provide our clients with legal advice grounded in small-town values. Please call us for an appointment if you have questions about your small business liability insurance policy or you’re wondering how to respond to a business liability insurance claim.
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You may also want to review another video talking about the Elements of a Business Liability Insurance Policy. You can make an appointment at any of our offices by calling 800-929-1725 or by sending us an email through our contact form.