Business owners, even when not directly involved, often bear vicarious responsibility for liabilities stemming from the negligence and mistakes of employees, agents, and other parties associated with the business. Vicarious liability can be a huge financial burden for businesses if liability insurance is not in place. Hence, Vicarious Liability in CGL Policy is a cover that all businesses should opt to protect themselves against liability risk.
What is vicarious liability in CGL Policy?
Vicarious liability is a legal liability that may arise due to negligence or mistakes committed by some other person. In the case of businesses, liabilities can arise from the negligence of employees, contractors, and agents. We can refer to this as vicarious liability. Businesses may bear responsibility for various types of vicarious liabilities, including personal injury and property damage. They also encompass discrimination, harassment, slander, and copyright infringement.
For example, if a construction worker in a construction business mishandles crane control, leading to the collapse of an adjacent building’s wall, the construction business bears liability for the loss.
Many small businesses face these day-to-day liability risks. Therefore, businesses should obtain general liability insurance to shield themselves from financial catastrophes stemming from vicarious liability claims.
What is CGL policy? How does it provide protection against vicarious liabilities?
CGL policy or commercial general liability insurance is an important business insurance that financially secures a business from the liabilities that may arise due to personal injury, property damage, and advertising injury caused due to business operations, employees, or services. General liability insurance coverage is customisable based on the nature of the business and the business-specific risks.
Lawsuits can have a negative impact on the goodwill of the business, which has the power to bring the business to a standstill. CGL insurance provides full coverage for third-party liabilities, including vicarious liability. The following are the coverages offered by the commercial general liability insurance policy:
Personal injury and property damage
Personal injury and property damage caused due to business operations, products, and services, and the employees are covered under CGL policy. This includes injuries sustained due to slip, fall, and trip on the business premises. In this, vicarious liability is also a part of it. It occurs when the liability arises from the mishandling or negligence of the employees, independent contractors, and agents. For example, your employee mopped the floor, and the customer suffered an injury by falling on the wet floor, which can be considered as a vicarious liability and can be claimed under a commercial general liability insurance policy. For example, you have a business that offers snow removal services. Your employee makes a mistake while providing the services to customers by damaging the vehicle parked at their gate. The property damage caused here is considered vicarious liability that gets covered under CGL policy.
Advertising injury
Advertising injury or damage caused due to slander, libel, etc., are also covered under the CGL insurance. Malicious statements and false statements made can lead to liability claims and such lawsuits are covered by the general liability insurance policy. Essentially, the policy covers reputational damages.
Medical expenses CGL Policy
Medical expenses related to the injured customer or the third party are covered under CGL insurance.
Apart from this, CGL insurance can cover many other liabilities and be customised as per the need of the business. Though vicarious liabilities are covered under the CGL policy, it is important to read through the terms and conditions of the policy and understand the exclusions and the scope of coverage of the CGL policy before you avail. It is crucial to protect the business with CGL policy for smooth operations and steady growth.
