Business insurance is great to have, but it’s not like Superman, ready to fly in and save you from every bad thing that happens. General Liability Insurance is valuable, for instance, because it can cover some of the most common risks you’re bound to come across, such as customer injury or third-party property damage. But even this policy comes with a number of exclusions – situations and events in which your coverage won’t kick in.
Below are five common exclusions you’ll find in a Commercial General Liability policy, exemplified by the experiences of Alfred Businessguy, an imaginary IT business owner and terrible decision maker.
General Liability Exclusion 1: Acts Committed Outside the Policy Period
Alfred waits to purchase an insurance policy a few months after opening his business. Things are going fine, he thinks, until he’s served with a lawsuit. During his first week open, a client slipped on an icy section of sidewalk just outside Alfred’s office and broke her hip.
Alfred makes a General Liability claim to his insurance company, but the carrier points out that the slip-and-fall happened before he bought the insurance policy. The accident isn’t covered because the policy excludes acts committed outside the policy period.
Be smarter: Get insured as soon as you start a business, and ensure you have continuous insurance coverage for the life of that business.
General Liability Exclusion 2: Knowingly Wrongful Acts
The slip-and-fall lawsuit cost Alfred a lot of money, so he brainstorms ways to drum up business.
Alfred decides to publish an article claiming that his competitor stole a bunch of money from a bank, even though that it isn’t true and he knows it isn’t true.
When the competitor sues Alfred for causing reputational damage, Alfred’s General Liability policy won’t provide any help because Alfred knowingly sought to slander his competitor. Alfred has to defend the lawsuit on his own dime.
Be smarter: Whether out of meanness or spite, don’t try to cause intentional harm.
General Liability Exclusion 3: Criminal Acts
After this lawsuit is settled, Alfred is really unhappy. One day, he meets with a client to go over the status of a project. The client disagrees on a certain issue and Alfred gets so upset that he punches his client, knocking him to the ground.
Although this is a third-party injury, because Alfred intentionally caused the injury – and because it is a criminal act – his insurance won’t provide coverage when the client inevitably sues. Also, he gets charged with assault.
Be smarter: Stay up to date with changes in the law and don’t do anything criminal.
General Liability Exclusion 4: Injuries to Non-Third Parties
Alfred has managed to keep a loyal employee named Winnifer. Winnifer is walking back to her desk one afternoon, when she trips on a loose piece of carpet and goes flying. She throws her hands out to brace her fall and breaks a wrist.
Alfred rushes to her aid, sends her to the hospital, and then calls his insurance company to see if they’ll pay for her medical bills. The company informs him that since she is an employee of his, she’s not covered by his General Liability policy. Only third parties, or individuals not part of the business, are covered.
However, they say, Winnifer is covered under Alfred’s Workers’ Compensation Insurance policy.
Be smarter: Alfred did pretty well here. He had Workers’ Comp Insurance, which is often required by law and covers employee injuries. But if you use contractors, for example, ensure they have their own insurance in case they get injured. Your General Liability Insurance likely won’t cover them because they’re working on behalf of your business.
General Liability Exclusion 5: Lawsuits over Professional Performance
Winnifer has to miss work due to her broken wrist, but during this time, Alfred accepts another job from a client.
The job involves a sophisticated bit of software coding. Alfred isn’t much of a coder. He usually left this kind of work to Winnifer (she’s great at coding). Regardless, Alfred does his best. He stays up all night to write and test code. He delivers the final project to the client.
The code doesn’t work and the client’s entire project is delayed. The client wants his money back, plus damages for wasted time. Alfred refuses and the client sues.
Alfred’s General Liability policy doesn’t provide coverage because this lawsuit is over his professional work. It’s not really an accident. He just did a bad job. Alfred also doesn’t have Professional Liability Insurance, which would have helped with this lawsuit.
Be smarter: Follow through with any promises you make on a job, especially if it’s written in the contract. An upset client could sue you for professional liability.
Pay Attention to the Details of Your Technology Insurance Policies
Keep in mind that every technology insurance policy offers slightly different coverage, and some polices could have more exclusions than others. However, some exclusions can be covered by endorsements purchased as add-ons, so ask your insurance agent about the specifics of your policy.
Be smarter than Alfred. Know your coverage.