Liability Insurance - Types of Commercial Liability Insurance Policy

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> Quick Guide to Liability Insurance Policy
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The Benefits of Liability Insurance Policy

Product Features

Pays for any litigation cost against any official or key employee. Protects directors and other key executives from various litigation costs. Necessary to embolden executives to work without fear of any kind of litigation. Covers any kind of litigations.

Professional Indemnity

Pays for litigation related to alleged negligence in service. Relevant for all services companies and individual professionals such as doctors, architects and chartered accountants. Conduct your business without worrying about acrimonious litigation.

Comprehensive General Liability

Pays for third party claims in your premises or claims due to your products. Covers both public and product liability. Public liability covers litigation by third parties hurt on your premises. Product liability covers damages caused by products that you manufacture.

Specific Liability Risks

These insurances are specific to select industries. Carrier Legal Liability protects fleet owners and transporters. Cyber Risk most applicable to companies dealing in online customer information. Commercial Crime relevant to financial services companies amongst others.

Quick Guide to Liability Insurance Policy

Definition of Commercial Liability Insurance

A commercial liability insurance is designed to protect your business and would pay for any legal liability that may force you to payout a huge compensation for damage or injury caused to a third party by virtue of your business’ day to day operations. A commercial liability insurance is essential for all the companies that involve in manufacturing or development or physical as well as software products to protect its clients, customers and employees.

Types of Commercial Liability insurance

There are essentially two types of commercial liability insurance policies, i.e., financial liability and casualty lines. Financial lines cover legal liability arising from financial loses of the third party. The casualty lines of product cover legal liability arising from property damage and bodily injury of third-parties.

Below are some illustrative products within financial and casualty lines:

Financial lines:

Casualty lines:

Benefits of Commercial Liability insurance

Covers legal costs - Liability insurance cover takes care of legal expenses when you have to defend yourself. These costs can rapidly mount up. In some insurances the insurer also has a duty to defend which makes them responsible for taking up the law suit. Generally, insurers are also a good source of identifying competent lawyers and preparing a defense strategy.
Meets contractual obligations - Business partners increasingly require you to purchase liability insurances to do business with them. This is true of companies overseas and increasingly, in India. Liability insurances meet all these contractual requirements. These insurances can also be modified to include your customer’s name as an additional insured.
Cover across countries - A well placed liability insurance will cover you for legal costs in any country. This becomes important when you have customers or operations outside of India. Often, litigation will take place in a foreign country. This is expensive and you may not have the market knowledge of how to defend yourself there.
Cover for compensation awarded by the court – A liability insurance not only covers for any legal costs that the insured party is liable to payout; it also covers for the payouts or the compensation as awarded by the court when the insured is found liable for the damage caused to the third-party.

Exclusions under Commercial Liability insurance

Exclusions for commercial liability insurance vary with insurers. However, some of the common types of exclusions are below:

Deliberate attempts or intentional damages caused to a third-party including clients, vendors and customers
Compensation for damages related to pollution
Contractual liabilities are not covered
Work and employee related perils
Claims arising due to wars or riots
Criminal act and dishonest claims

Note: This is not an exhaustive list, your policy copy will contain details of all the exclusions under your specific liability insurance policy.

Documents Required for Commercial Liability insurance

Below is the list of documents required while filing a claim for commercial liability insurance:

ID proof of the insured and the claimant
Copy of policy document
FIR report, if any
Notice served by the third party
Supporting documents for type of claim, extent of loss, loss location and so on
Additional documents as required by the insurance company

Frequently Asked Questions

One example of a liability insurance can be: if a product manufacturer sells defective products, unintentionally, and that causes harm to the consumers then they can sue the manufacturing unit. In return, the manufacturing company can claim for a liability insurance to protect their business and their finances.

A commercial general liability insurance is a type of liability insurance that covers a business for liabilities arising due to bodily injury, personal injury and/or property damage caused by the business to another entity.

Exclusions in a liability insurance varies by product type. For example, a D&O insurance would exclude bodily injury and property damage whereas a commercial general liability would cover this. Some common exclusions across all liability insurances include:

Willful or gross negligence

Intentional harm

Criminal or fraudulent acts

Acts committed before the policy inception

A commercial general liability insurance is an example of a liability insurance. A commercial general liability insurance provides coverage to a business for any injury to person or damage to property caused to a third-party by the business’ operations.

People in service industry such as doctors, lawyers can be subject to liability arising misconduct in the service provided. So, a personal professional liability insurance is one that protects a member against claims resulting from injuries or damages caused to other people. While a commercial liability insurance, as the name suggests, will protect your business from liabilities.
It is also possible to buy a personal liability insurance for your house. In such a case, any bodily injury or property damage cause by you in relation with your house will be covered under such a public liability insurance.

Yes, in fact liability insurance is very relevant for them. Litigation can bring a small business to a standstill and you want to have financial support through the insurance to defend yourself.

The premium amount of liability insurance is determined by a number of factors, namely –

Type of policy

Limit on indemnity

Past claim settlement

Overall risk assessment

Annual turnover of the enterprise

Whether your company is listed or unlisted

A business always has chances of getting into one or the other liability by virtue of its operations and the fact that multiple stakeholders are involved. A liability insurance helps you to be braced for any unforeseen incident that may cause you to payout large sums due to lack of coverages.

A liability insurance does not cover for any intentional damage or injury caused to a third party. They do no cover contractual liabilities.

There are three kinds of insurers in the market: life insurers, standalone health insurers and general insurers. Liability insurances are underwritten by general insurers such as: New India Assurance, ICICI Lombard, SBI General, HDFC Ergo.

There are a few insurers who have a strong focus on liability insurance. But they may also engage in other lines of business.

The role of insurance company varies by type of policy. In some policies such as cyber liability insurance, the insurer may help with consultants for first response in the event of a claim. In many cases, once the claim is intimated the insurer would consider the events of the case and may recommend for a reputed lawyer for those types of cases.

One should buy a commercial liability insurance for their business because it provides full protection against any third part liability. Compensation for accidents, cover for operational hazards, medical expenses for the third party are some of the key features of a commercial liability insurance plan.

Business owners, factory owners, professionals who run IT companies and BPO, professionals from specialized field like doctors, lawyers and auditors must take a dedicated liability insurance policy to protect their business interest and liability arising due to negligence, third-party fraudulence or any other kind of unforeseen external risks.

List of documents required for buying liability insurance vary with insurance company. Most insurance companies will ask for the below documents and information:

Proof of identity of the buyer

Proof of establishment for which liability insurance has to be taken

Prospectus document providing company profile and features of the product

Below mentioned are some of the steps that need to be taken to claim for a liability insurance policy:

Intimation of claim to the insurance company as soon as the issue arises

Submit necessary documents as asked by the insurance company

Arrangement of evidence to support the claim

The initial notice which was served upon the client

Regular update on the case proceedings

Invoices of the lawyer fee paid

Defense cost refers to all the cost incurred for defending a lawsuit in case of liabilities. These costs involve hiring a lawyer, court fees, investigation costs, legal paperwork costs and so on. And defense costs as payable in advance of the final judgement.

Liability insurance will provide protection against claims resulting from injuries and damage to people or property. So, yes, they will cover for the payouts for which the insured party is found liable in case the insured loses the case in the court of law.

Insuropedia

A Brief Guide To Commercial General Liability Insurance

The commercial general liability insurance policy offers protection to business owners by covering the defense cost and other legal costs arising due to third party liability and product liability claims. It also provides coverage against premises liability claims arising due to injury or damage.[...]

What is the importance of retroactive date in liability insurance?

The retroactive date in a liability insurance policy is either –

Date from which you have held uninterrupted insurance cover (despite changing insurers on renewal) or
Date from which your insurer has agreed to provide

The retroactive date in liability insurance is important because it determines how far back in time an incident can occur for your policy to still protect you.[...]

Liability insurance is offered as an add-on with home policies

We made a claim on our family health insurance, which we have been renewing for the past 10 years, in 2016 for my husband’s appendix operation. There were no claims before or after that. Will the subsequent years in which no claim was made be eligible for no-claim bonus[...]

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Commercial Liability Insurance

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