Tort

What is a tort?

A tort is a wrongful act or an action that harms someone else. It’s usually a civil (non-criminal) offense. A person who commits a tort is called a tortfeasor.

In the context of small business insurance, a tort is a wrongful act that leads to damage or loss, for which the wrongdoer becomes legally responsible. This can include issues like negligence, battery, defamation or product-related harm.

Tort vs. contractual claim: What’s the difference?

Accidents that happen at your business can lead to both tort and contractual claims. However, the legal grounds for each are different, as are the types of losses that can be recovered.

Tort claims come from legal responsibilities and social norms. They involve harm that was caused by carelessness or was purposeful.

Contractual claims, on the other hand, happen when someone breaks a deal or agreement.

With health and property insurance, risks already known are covered, no matter who is at fault. For tort cases, however, liability is determined, and you (the insured) pay for any damages you cause.

Common types of tort claims

A tort claim is a lawsuit someone files to get money for damage they got in an accident. Common tort claims involve:

• Negligence: Business failure in reasonable care causing harm, like a wet floor without warning leading to a customer slip.
• Product liability: Covers injuries from defective products, vital for manufacturing, distribution or sales businesses.
• Personal and advertising injury: Includes libel, slander, defamation, wrongful eviction, privacy violations and certain copyright claims.
• Professional mistakes: When you or your employees are accused of making a mistake that causes financial harm to another person or business.
• Premises liability: Injury or property damage caused by dangerous conditions or negligence at a business property.

Insurance provides a safety net by transferring risk to an insurance carrier. It ensures that victims are compensated for the harm they have suffered.

If you’ve linked your personal and business assets and don’t have insurance to cover a tort, you risk your personal finances and reputation.

How to minimize exposure to tort claims

You can take steps to minimize your exposure to tort claims. Some actions include:

• Do a risk assessment.
• Establish workplace safety protocols and measures.
• Ensure the business follows local, state and federal laws.
• Consult legal and insurance experts.
• Select business insurance that covers your business’ most significant risks.
• Review and update insurance policies as your business grows to ensure you’re always covered.
• Establish processes for unexpected events. This might include incident documentation, customer complaint mechanisms and a routine for contacting your insurer in case of a tort claim.
• Implement compliance, safety and risk management training for employees.
• Use contracts to transfer risk where appropriate, including indemnity clauses in agreements with suppliers or contractors.

Let NEXT take care of your business

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