The Wonderful World of Liability Coverage

Elliott Insurance Services    July 30, 2018

Liability Insurance

Liability coverage is built into most insurance policies from personal auto to big commercial policies. The only catch is that most of these liability coverages have exclusions that make it necessary to make sure you are still covered when you think you are. Within this article we are going to be looking at the very wide world of liability insurance coverage and the types of policies that are required to obtain that type of liability coverage. More importantly we are going to look at the exclusions and the areas where you could get caught thinking you have coverage when in fact you do not.

What is Liability Coverage?

Liability coverage is there to protect you in the event of a lawsuit where you are considered legally liable or negligent. This coverage will respond when there has been a claim against you from a third party for some action or lack of action resulting in injury or damage to property or person.

All of the different types of liability coverage will have exclusions where there is a separate policy available to cover it or where coverage is not feasible. For example, your auto insurance liability will not cover your liability at your house. It is important to know that not everything is covered by your liability coverage in the event of a lawsuit/claim. We will try to outline some of the most common types of liability coverage below so that you can ensure you have the proper coverage for your needs.

House, Condo, & Tenants Liability

Every home, condo, or tenant’s insurance policy should have a “personal liability” coverage built into it. You will want to review your policy to ensure this coverage is included and that it is worldwide and not limited to your specific premises. The personal liability coverage in these types of policies are usually your first line of liability coverage that can follow you anywhere in the world.

If you have worldwide personal liability coverage, the liability coverage on your home will respond when someone has a slip and fall at your home or even if someone trips over your suitcase while at the airport. As stated above, there are exceptions to this liability coverage from every insurance company. Common exclusions to the liability coverage on your home insurance include but are not limited to are:

  • Business Pursuits (insured separately)
    • This will exclude coverage for any business pursuits or business use in the premises.
  • Bodily Injury or Property Damage Caused Intentionally
  • The Ownership or Use of Watercraft, Aircraft, or Motorized Vehicle (insured separately)
  • Body Injury or Property Damage Caused by Nuclear Energy (insured separately)
  • Transmission of a Communicable Disease
  • The Distribution or Display of Data Via a Website, Internet, or Electronic Communication (insured separately)
  • Any Sexual, Physical, Psychological, Emotional Abuse, and The Failure to Take Steps to Stop the Abuse.

As you can see there are significant gaps in the liability insurance for what you may not be covered for. It is always important to check your “wordings” on your insurance policy for confirmation.

Auto Insurance Liability

As you saw in the home insurance section, there are exclusions on your home insurance for motorized vehicles. They exclude motorized vehicles as it is required to get a separate policy for your vehicles.

To take directly from the Automobile Insurance Policy Wordings (OAF 1) the policy: “Provides coverage for you or other insured persons if someone else is killed or injured or their property is damaged in an automobile incident. It will pay for legitimate claims against you or other insured persons up to the limit of your coverage, and the cost of settling claims.”

Common exclusions to the liability coverage on your auto insurance policy:

  • Any Liability Arising From Contamination of Property Carried
  • Any Liability Arising For Property Being Transported
  • Nuclear Energy / Hazardous Materials

Commercial Insurance Liability (CGL)

If you have a quick look through the news you will quickly realize that companies get sued all the time, and without the proper liability coverage, you could be facing that lawsuit without coverage. If you own a business, it’s critical you know exactly what your liability will & will not cover you for.

When it comes to commercial insurance liability, there are a lot of options out there. Some types of liability exposures include Premises and Operations Liability, Products Liability, Complete Operations Liability, Personal Injury Liability, and many others.

Due to the amount of different liability coverages available and the large number of exclusions on these types of policies, it is always suggested that you have an insurance professional go over your business operations and work out exactly what coverages you need to protect your investment.

The common exclusions on a commercial general liability policy are:

  • Errors and Omissions From Professional Services (lawyers, brokers, real estate)
    • You can purchase separate coverage
  • Cyber/Data (hacking, loss of data, privacy breaches, etc.)
    • You can purchase separate coverage
  • Board of Directors and Officers Exclusions
    • The CGL policy will exclude lawsuits towards the boards of directors and officers.
    • You can purchase separate coverage
  • Employers Liability (if an employee gets injured)
  • The Ownership or Use of Watercraft, Aircraft, or Motorized Vehicle (insured separately)
  • Personal and Advertising Injury
  • Expected or Intended Injury
  • Abuse
  • Contractual Liability
  • Recall of Products, Work or Impaired Property
  • Damage To Your Product or Work

There are many more exclusions when it comes to commercial insurance packages. It truly is critical that you know if your exposures are covered by your CGL package.

The Final Word

Clearly the world of liability coverage can be complicated. There are a vast amount of different liability coverages and a copious amount of exclusions among the different policies. We don’t suggest talking to an insurance professional just to get you to talk to us, we suggest talking to a professional because the insurance world can be quite complicated when you look under the hood. Thinking you have coverage for something and not actually having that coverage could be a costly mistake that may even result in bankruptcy. Contact your insurance professional to find out if you have the coverage you think you do, and if they can’t help you, call us.

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