Legal liability

Legal liability is when you are legally responsible for the financial loss of another under the law. This responsibility can arise from intentional actions, accidents, or contracts.

Essentially, you become “legally liable” when you are sued for damages, and the court finds you financially responsible for those damages.

Legal liability and small business owners

As a small business owner, legal liability generally refers to cases when you or your business is judged responsible for injuring or financially harming another person. This judgment can result in fines, payments, loss of licensing or other penalties depending on the incident.

Because these judgments can vary from thousands to millions of dollars in each case, small business owners often purchase liability insurance to help protect themselves and their businesses from legal liability.

Types of liability insurance

Depending on their industry, businesses face different risks when it comes to legal liability. Some must ensure the public is safe in their store, while others must ensure the work they’ve done will not fail for years to come.

In order to offer every business the coverage they want without making them pay for insurance they don’t need, there are many different types of liability insurance.

A few of the most common liability insurance policies for small businesses are:

• General liability insurance. Helps protect against bodily injuries, property damage and resulting lawsuits. This coverage also helps cover advertising injury (or personal injury) and reputational harm.
• Product liability insurance. Usually included with general liability, this coverage can protect from having to pay for legal fees if a customer says an issue with your product caused them injury or property damage.
• Workers’ compensation. Helps cover medical expenses for injured employees, lost wages, retraining and legal expenses related to the injury or illness the injury.
• Professional liability insurance. Also known as Errors & Omissions (E&O), this policy can cover business errors, mistakes, acts of negligence, and even missed deadlines that cause clients financial harm.
• Employment practices liability. Can protect against lawsuits based on discrimination, wrongful termination or harassment.
• Business owner’s policy (BOP). Combines general liability coverage with commercial property insurance to help keep your legal liability covered while protecting your property against damage or loss.
• Commercial auto insurance. Helps provide coverage when the driver of a company vehicle, or an employee driving their own vehicle for a work-related reason, causes injury or property damage to someone else.

The limits of liability insurance

While liability insurance is designed to help businesses weather various financial storms they may face, it can’t provide 100% protection in every case.

For small businesses, liability insurance generally only applies if the harm caused is accidental or due to negligence. If the courts found the damage or injury to be intentional, liability insurance wouldn’t help cover the damage.

So if a customer slips and falls and breaks their wrist in your business, general liability can help pay for their medical bills. However, if one of your employees jokingly trips a customer and they fall and break their wrist, your insurer may not help cover the bill.

Additionally, liability insurance can only cover damages up to your policy limits. The maximum amount you’re covered for is based on your per-claim and aggregate limits. Beyond this, you may have to pay out-of-pocket.

These limits can typically be raised to any level you wish, but expect to pay a higher premium to get the extra insurance coverage.

How NEXT helps you get the coverage you need

It might seem like there are too many options when it comes to legal liability insurance to be sure you get the coverage you need. That’s why NEXT has custom-tailored business insurance for over 1,300 small business professions.

It’s simple and you save money because you won’t pay for coverage you don’t need.

You can start a quote, customize your options and access your certificate of insurance online immediately — in about 10 minutes.

Start your instant quote today.