Commercial Insurance

Commercial insurance is a broad term referring to the many types of insurance a business might acquire. Businesses, like individuals, may insure their property against fire, flood, liability claims of all kinds, and other damage. They may choose to protect specialized equipment and property, both real and personal. Commercial enterprises often need to purchase commercial auto insurance because even if the business does not own any vehicles, its employees' individual auto policies may not cover them while on the job.

Businesses may choose to purchase business interruption insurance, which pays for the cost of employee salaries and other expenses if the business cannot operate when the premises are damaged. Most businesses are required by law to carry some form of workers' compensation insurance, which compensates employees who are injured while performing their job duties. Businesses also may have other unique insurance needs.

When a business buys a policy to protect itself against liability, it is likely to be a "CGL" (commercial general liability) policy. This type of policy pays for many types of risks that might cause the business to be liable to a third party. Coverage under a CGL policy usually includes such risks as personal injury claims brought by customers injured on the business premises or by the business's products. A policy also may provide coverage to protect against libel or slander lawsuits filed by a competitor.

CGL policies usually can be purchased in two forms: occurrence or claims made. An occurrence policy covers bodily injury or property damage that occurs during the time the policy is in effect. An occurrence often is defined as an "accident, including continuous or repeated exposure to substantially the same general harmful conditions." An occurrence, therefore, does not have to be a sudden event, but may be an ongoing situation. Under an occurrence policy, the insurer would still provide coverage if the injury occurred during the policy period, even if the claim was not filed until after the policy term has ended. For that reason, lawyers recommend that businesses keep their occurrence policy documents even after the policy period has ended.

A claims made policy covers all claims filed against the business during the time the policy is in effect. Even if the damage occurred before the policy was in effect, coverage would still exist if the claim were filed during the policy period.

Commercial general liability policies do not cover risks that are "expected or intended" by the insured. For instance, if a business deliberately breaches a contract, its CGL policy probably will not cover any claims resulting from that breach. CGL policies also usually do not cover damages arising from pollution, damage to the insured's property, or property damage to the insured's own products. This last exclusion often applies to construction companies and may prevent them from seeking reimbursement for damage to projects they are in the process of building. Exclusions in policies must be carefully reviewed and if confusing, the ambiguity will be interpreted against the insurer, and coverage provided.

Home-based businesses often are not covered under homeowner's insurance, so a home-based business may require commercial insurance to cover losses and liabilities arising from the business operation. The business's assets, such as computers, may need to be insured under a special rider to the homeowners' insurance or under a separate policy. In addition, a commercial liability policy may be needed to protect the business against injuries suffered by persons visiting the home for business purposes.

Checklist: Things You Can Do To Minimize Your Business Risks and Losses

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Checklist: Things You Can Do to Minimize Business Risks and Losses

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