As a business owner, we know you put your customers first and are always thinking about delivering a quality good or service while keeping safety top of mind. Unfortunately, despite our best intentions, accidents large and small happen every day. In today’s litigious society, even a single liability claim can put your small business… out of business. Business owners can protect themselves from costly liability claims with the right type of liability insurance.
What Is Commercial General Liability Insurance?
Commercial general liability insurance (sometimes called CGL) is defined very simply in Canada. It is a liability policy designed to protect you and your business from liability claims brought on by 3rd parties alleging bodily injury or property damage caused by your business activities or employees. Your CGL insurance is your first line of defense when claims arise - even if they are without merit. Because the insurance company is responsible for paying those claims, they also have a duty to defend you against a lawsuit at their own cost.
Commercial General Liability Coverages
Most CGL policies consist of 4 sections outlined on the declaration page alongside important terms and conditions like deductibles, aggregate limits, etc.
Section A - Bodily Injury and Property Damage
This is probably the most important part of your CGL coverage as it protects your business in the event your operations, products/services or employees cause injury or property damage to a 3rd party (ie. a customer). This section will work to defend you against claims and compensate the customer if you are ultimately found at-fault for the damage.
That said, there are some important exclusions to be aware of:
Expected or intended injury (ie. assault)
Employer’s liability for injured employees
Section B - Personal and Advertising Liability
If you or your employees damage the reputation or character of a 3rd party (ie. by writing something disparaging about a competitor online) this is the section that steps in to cover you. Some examples of coverage areas include:
False arrest (important for retail businesses)
Wrongful eviction or entry
Section C - Medical Expenses
Although accidents happen often, the resulting injuries are usually minor. This coverage will pay their medical expenses regardless of fault to help protect your business reputation and mitigate the possibility of a future lawsuit.
Section D - Tenant’s Legal Liability
Many CGL policies also include a Tenants Legal Liability component to insure against accidental damage to a rented premises. This coverage is often required by landlords.
Commercial General Liability Insurance Costs
As a general liability policy, they are not industry specific but when you complete your application form, the type of business operations you undertake and the jurisdictions you operate in will affect your premiums. If your business operations involve higher risk activities (ie. skydiving), you can expect to pay more. Similarly, if you have more revenues or do business in litigious jurisdictions like the United States, then you might also have to pay more for insurance as well.
But rather than looking at insurance as a cost centre, it is important to look at it as a strategic asset. If you want to do business with large businesses like Walmart or even Amazon, they will require that you carry adequate liability insurance. By carrying adequate insurance, you are showing these people that you are a serious player and stand behind your goods and services.
Another way to frame the conversation around CGL insurance is to look at it as a way to protect your business reputation. Like it or not, accidents and frivolous lawsuits happen. When they do, you want to make sure you have the financial resources available to either compensate your valued customers or defend your reputation in the court of law. After all, a reputation can take a lifetime to build but only a split second to destroy.
Commercial General Liability and COVID-19
In response to the recent COVID-19 pandemic, insurers have been forced to revise their coverages to ensure financial stability. Lately, we have been seeing a new “Communicable Disease Exclusion” introduced into new and renewing CGL policies. Sometimes, this type of exclusion can also be introduced as a “Biological or Chemical Material Exclusion” or “Microorganism Exclusion”.
Policy wordings and names vary from insurer to insurer but it’s safe to say that these exclusions will affect your liability coverage for any COVID-19-related losses.
COVID-19 Risk Mitigation
With such a glaring gap in coverage, business owners need to think carefully about how to mitigate this risk as they work to reopen their businesses. The first step is to follow all provincial and federal guidelines for business reopening. Some common steps include:
Requesting visitors wear masks and disinfect their hands upon entering and exiting the premises
Erecting physical barriers between staff and guests
Requiring staff to wear masks and gloves
Placing tape or stickers on the ground to help enforce physical distancing
Limiting capacity in certain areas
Outside of the overall risk management procedures, one way businesses in Canada are looking to transfer risk from this coverage gap is to have customers sign Waivers of Liability prior to entering the space. This waiver is a way for businesses to disclaim liability if they were to contract COVID-19 while on the premises.
If you have been to a gym or booked a restaurant reservation, you may have been asked to complete one. These waivers essentially warn patrons that they are about to enter a potentially dangerous situation and that by signing, their legal rights could be affected. They are also used to ensure that patrons who are showing symptoms or are required to isolate are rejected.
These waivers are an important part of a risk management strategy as we seek to reopen our businesses during these challenging times. Here are some things to keep in mind when deciding how you should implement your waiver system:
Electronic waivers are better at supporting physical distancing efforts than traditional paper waivers. They are also easier to store.
Do not copy and paste someone else's waiver - they are an important part of a risk management strategy and have to be tailored to their specific situation.
To ensure the waiver is legally enforceable, make sure you give people enough notice that they are entering a potentially dangerous situation. This includes making the warnings more visible or putting up signs around the establishment.
The best electronic waiver systems can track read times so you can prove the person read and understood the content. If not, have them at least initial key parts of the waiver.