A commercial liability insurance policy is very handy for businesses. It protects a business against liabilities arising out of its operations, such as damage to property or injury at the workplace, or damage to reputation. So what are exclusions of commercial liability insurance?
What does commercial liability insurance not cover?
While commercial liability insurance is beneficial for your company, it is important to understand the exclusions before buying the insurance. This will help you make the right choice and provide clarity on the scope of your insurance.
Generally, commercial liability insurance does not cover risks arising from pollution, professional services such as consulting, employee and employment disputes such as compensations. Similarly, insurers typically do not cover risks to the business due to war, alcohol consumption, and directors’ and officers’ liability.
Some insurers also do not consider construction defects arising from poor workmanship as part of commercial liability insurance. Likewise, they also exclude employee injuries, damage to vehicles, and risks against auto accidents. Furthermore, insurers also exclude intentional acts that cause injury or punitive damages incurred due to a lawsuit.
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Case study: Mistakes excluded unless specifically negotiated
Mr. Batra runs a successful event management company. He has bought commercial liability insurance to protect his business.
He recently signed a contract that required his company to manage and organize a wedding ceremony, the whole extravaganza lasting multiple days.
On the night of the themed party, his staff made a mistake and covered the stage with blue flowers instead of purple, thus spoiling the theme. Consequently, the owner of the venue got into an intense argument and Mr. Batra’s staff physically assaulted him. As a result, Mr. Batra’s client threatened to sue his company for poor services and manhandling of the venue owner.
Additional Read: What to expect from your Commercial General Liability Policy?
Mr. Batra approached his insurer to claim damages for the loss of his company’s reputation and other losses. However, these damages arose because of careless mistakes in delivering professional services. Moreover, the commercial liability insurance did not cover the act of violence. Therefore, he had to bear the expenses. If he had negotiated to cover these as well under the insurance, he could have made a successful insurance claim.