What Is Legal Liability and Why Is It In Your Business Insurance?

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Business Insurance

Even small businesses can be a victim of a lawsuit. This is why many businesses include legal liability in their policy. Here’s what it means.

When it comes to running a small business, one of the most important things to keep in mind is your insurance plan. Just as your personal health and auto insurance policies protect your personal assets from prohibitive expenses, the right business insurance policy will protect your business assets as well.

In this article, we’ll take a look at one of the most important kinds of insurance to have: legal liability insurance. We’ll answer the question of what is legal liability. We’ll show you how you can protect yourself should this scenario ever materialize in your business.

What is Legal Liability?

Legal liability is when an entity is held responsible for damaging or harming another entity. This could be either intentional or as a result of negligence.

In plain English, that means that your business causes harm to another business or person. There are many different ways that this could happen unintentionally.

For instance, let’s say that you’re a manufacturer of heavy construction equipment. Your construction equipment is dangerous to use. As a result, you put safety warning stickers on the equipment that describes the involved dangers.

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Somewhere along the assembly line, production messes up on one of the pieces of equipment and doesn’t put the sticker on.

Quality control fails to catch the error. The equipment is shipped to another business.

An employee of that business uses the equipment. They injure themselves in an accident because they weren’t able to read your safety warnings.

In this kind of situation, you could be held legally liable for that employee’s injury because your company made the mistake of not putting the mandated caution sticker on the piece of equipment.

What is Legal Liability Insurance?

Legal liability insurance is a commercial umbrella that protects you from this exact scenario that we described. In this situation, you could have been liable for extensive medical bills. The employee might not have been able to work for a while, and as a consequence, you could be ordered to pay the equivalent of their loss of wages.

In addition, if they claim mental or emotional damages, you could be looking at even more significant bills. All these bills together could easily drain your bank account of its operating funds.

Legal liability insurance will protect you in this situation by paying out those bills according to the policy limits that you have in place.

Protect Your Business Today

There you have it. Now that you know what legal liability is and how to protect yourself with the right kind of business insurance, there’s no excuse for you not to have the right coverage to protect your company.

Don’t let your business come undone because of one small mistake that harms another business or person. With the right insurance policy, you can protect yourself from the results of the mistakes that are an inevitable part of doing business.

For more business advice, be sure to check out the rest of the articles available on the website before you leave!

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