Businesses often associate liability claims with big lawsuits or disasters. Some of the costliest liability claims start from small incidents that may seem irrelevant or not initially reportable to your insurance company. Missed steps in rectifying small misunderstandings or accidents could turn into major disasters in a short period of time.
Bowthorpe & Associates Insurance Producers helps businesses identify how commonly missed liability exposures could affect their bottom line. Read below to learn about scenarios your business may not realize could result in a liability claim.
Small Property Damage Claims Aren’t Always Small
It doesn’t take long for small incidents to turn into substantial claims. Perhaps a contractor damages a homeowner’s flooring while working or your technician spills on a customer’s computer. You may think that the cost to repair the small amount of property damage will be insignificant.
When you factor in business interruption, loss of use, and dissatisfied customer claims, that “small” liability claim can quickly grow.
Businesses tend to wait too long before reporting these incidents to their insurance company. They believe that the situation can be taken care of without involving their insurance provider. Unfortunately, when situations are not reported in a timely manner, it could create coverage issues should the incident lead to a lawsuit or the customer decide to sue for a larger amount.
Verbal Promises Can Leave You Held Accountable
Business owners and managers often make verbal agreements or have conversations with customers, vendors, and subcontractors. When both parties have different expectations and no proof of what was agreed upon, issues can occur.
The customer is now able to say that you promised him or her something that you do not plan on delivering. If the situation escalates and they decide you were negligent or misrepresented your product or service, you could be held accountable for their legal fees.
Employee mistakes can lead to costly liability claims. One of your employees sends out an email to the wrong person with confidential information. Another one of your employees knocks over a customer’s TV. Maybe one of your employees gave incorrect loading instructions to a driver.
Employees can make mistakes. Don’t think that just because it was a small mistake that your customer will not hold you liable. It only takes seconds for that customer to try and demand money from you to “make up for the mistake.”
Social Media and Advertising Claims Are Overlooked
Social media posts, online ads, and responses to customer reviews can create unintended liability exposures. Some claims that seem to stem from social media activity include:
- Defamation
- Copyright infringement
- Using someone else’s picture
- Misrepresenting your service or product
- Privacy violation
Social media moves fast. It only takes a few seconds to post something that could put your business’ reputation and leave you open to legal fees. Some general liability policies will offer coverage for certain types of advertising injury claims, but most businesses don’t report these incidents to their insurance company.
Vendors and Contractors Are Your Responsibility
Business owners often believe that if they don’t employ someone directly, their liability does not apply to them. Unfortunately, liability can extend to your business if your vendor or contractor:
- Causes damage to property
- Injures a visitor
- Creates an unsafe work environment
If you do not have the proper contracts or your vendor does not provide you with insurance certificates, you could be held partially responsible.
Cyber Liability Risks Are Often Overlooked
Businesses are collecting customer data more than ever before. With website registration, online payment processing, cloud technology, and email communication, businesses are at risk for cyber liability claims.
Your business could be at risk for:
- Cost of notifying customers
- Legal fees
- Investigation costs by regulators
- Credit monitoring costs
- Business interruption
- Reputation management
Cyber liability can overlap with your operations liability policies when third-party vendors, remote employees, and cloud technology are involved.
Waiting To Report A Loss Can Affect Your Coverage
Many businesses do not report claims to their insurance company soon enough. Business owners think that since the incident was small, it can be resolved without contacting their insurance provider. Another reason why businesses report claims late is because they think the incident will just go away.
By not reporting the incident to your insurance company, you could be creating obstacles for your claims adjuster. Things such as investigating the claim will be harder; lack of evidence and not notifying your insurance company in a timely manner could affect your coverage.
Conclusion
Everyday liability risks change as your business grows. As your technology, employees, and customers change, so do liability risks. Businesses who are aware of these common scenarios are better prepared to limit their financial burden if a claim occurs.
When you have a good understanding of how everyday situations can turn into a liability claim, you can prevent those claims from happening in the first place. Insurance is only useful when you allow it to work for you. Not only should you have insurance, but you should practice proper risk management, keep good documentation, train your employees, and communicate with your vendors.
Contact Bowthorpe & Associates Insurance Producers today to learn how you can better protect your business from the liabilities you may be overlooking.
Frequently Asked Questions
Aren’t small incidents just considered small liability claims?
A: No. A small amount of property damage, a customer complaint, or an employee accident can turn into a larger-than-expected financial burden. If the customer decides to take legal actions against your business, what was once a small claim could turn into a costly lawsuit.
Is it really that bad to make verbal agreements?
A: When a business makes a verbal agreement with someone, there is no proof that the agreement was made. If the customer and business owner have different opinions on what was said, the business will be held responsible.
Will my general liability insurance policy cover claims that happen on social media?
A: This will depend on your policy. Some policies cover advertising injury claims, which include defamation, copyright infringement, and misrepresenting your business.
What happens if business owners wait too long to report a claim?
A: If business owners do not report a claim to their insurance company in a timely manner, they could be jeopardizing their coverage. Not only that, but it will be harder to investigate the claim due to lack of evidence and no documentation on what your business did to rectify the situation.
Do I need to be worried about my vendors?
A: Yes. If something happens while your vendor is performing work on your business’ behalf and they do not have insurance, you can be held liable.