Does Business Insurance Cover Civil Lawsuit

When obtaining business insurance, my primary focus wasn’t on lawsuit coverage.

Despite my cautious approach to business operations, the looming risk of a lawsuit is always present.

Is my business adequately protected with general liability insurance?

Addressing this query isn’t as straightforward as one might assume. The response hinges on the specifics of each insurance policy.

Some policies may provide coverage, while others might not. Allow me to elaborate.

General liability insurance, a mandatory requirement for every business, offers coverage for certain lawsuit scenarios but not all.

Specialized coverage is necessary for specific types of lawsuits, such as those related to professional errors or employee injuries.

In essence, coverage is contingent on the alleged types of damages. If the issue falls within exclusions, you won’t have coverage.

Conversely, if it falls within the included categories, you generally have coverage.

Does business insurance cover civil lawsuit
Does business insurance cover civil lawsuit: Photo source (Sapling)

What types of lawsuits does general liability insurance cover?

I’ve got general liability insurance covering:

  1. Third-party bodily injury (e.g., customer injury on your property).
  2. Third-party property damage (e.g., employee damages customer property).
  3. Products liability (covers injuries caused by your product).
  4. Other lawsuits, like libel and slander.

Note: Not all lawsuits are covered; policy limits may apply. Check your policy for specifics on coverage.

Also read: Does Business Insurance Cover Robbery

Which types of lawsuits aren’t covered by general liability insurance?

Alright, so if general liability covers some lawsuits, what doesn’t it cover?

  1. Professional mistakes (malpractice): Get malpractice insurance for errors in your profession.
  2. Employee injuries: Workers’ compensation handles on-the-job injuries, but additional coverage may be needed.
  3. Discrimination: For employment discrimination, consider employment practices liability insurance.

Also, explore other policies like directors and officers liability for broader protection.

For a clear picture, consult with your independent insurance agent.

Are there limits on what the policy will pay?

Legal costs covered by insurance have limits, depending on the type of coverage.

General liability coverage has a limit per occurrence, and there’s a general aggregate limit for the entire year or policy period.

Other areas, like libel or privacy lawsuits, may have separate occurrence limits.

The aggregate limit is like a yearly bank account, but different types of claims may have separate pools of money to prevent one incident from depleting the entire yearly total.


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