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General Liability Insurance in Tennessee

Why do I need Liability Insurance?               
Good liability risk management can reduce the chances that your business will be sued, but it can never eliminate the risk entirely. You or a member of your organization can make a mistake that injures someone or damages property. Your mistake could harm the reputation or interfere with the privacy of a customer, client, competitor or member of the general public. When such injuries occur, you may be legally liable to pay damages to someone who suffers a loss due to your actions or inaction.    

How are liability and damages determined?            
Every Nashville Area business owner has a duty to take reasonable care that his or her actions do not injure others. The same rule applies to business entities. Not repairing a pothole in a parking lot, not lighting a dark stairway, failing to train workers how to do their jobs safely and legally or failing to provide directions for the safe use of a product can constitute negligence if a client, customer or member of the general public is injured as a result. The legal meaning of negligence is failure to exercise reasonable care.
What kind of liability policy should I get?
For small Tennessee businesses the most efficient and least expensive way to purchase liability insurance is usually as part of the Businessowners Policy (BOP) which combines property and liability insurance in one contract. Alternatively, a business may purchase a Commercial General.

What types of damages are covered by the BOP?
Your liability insurer will pay damages that you are legally obligated to pay as a result of “bodily injury,” “property damage” or “personal and advertising injury,” up to the policy limits and subject to your deductible.  Punitive damages are generally not covered, although there may be some exceptions.  
Bodily injury means injury, sickness, disease or death; it may include injuries that are emotional or mental, such as post traumatic stress syndrome or humiliation.

Personal and advertising injury includes libel, slander or any defamatory or disparaging material or a publication or utterance in violation of an individual's right of privacy; infringing the privacy or copyright rights of another in your advertisement; wrongful entry or eviction, or other invasion of the right of private occupancy; and false arrest or wrongful detention.                        

What is covered medical expenses?
For the most part, your BOP liability coverage is for situations where a third party claims you were negligent and sues for damages. The medical payments coverage is an exception, as it pays medical expenses for bodily injury to third parties that occurs on premises you own or rent or as a result of your operations regardless of fault.                  

Who is insured?
BOP liability coverage insures a sole proprietor, partners or partners named in the policy "Declarations," but only with respect to their duties on behalf of the business. The spouses of sole proprietors or partners are also covered. If your organization has officers and directors, they are insured, as are your stockholders, but, once again, and this applies to all parties, only with respect to their duties or liabilities in connection with the business. Employees and volunteer workers are insured for acts committed within the scope of their employment in your business.

What is the "products completed operations" hazard?
If you manufacture, sell or distribute a product, there is the possibility that it could cause bodily injury or property damage for which you would be legally liable. Even if you only sell or distribute the product, you could still be liable depending on the circumstances.

If you provide a tangible service, such as installing heating systems, there is the risk that negligence could result in damage caused by your work after your work is done (a “completed operation”). For example, a contractor installs a steam heating system and three months later it leaks and causes property damage.

The "products completed operations" hazard covers each of the above risks under certain conditions. 

What is not covered?
A number of situations, people and circumstances are excluded from the standard BOP liability coverage. There are various reasons. Injuries to employees are excluded because employees are usually covered for work-related injuries by workers compensation insurance. Liability for pollution or in connection with professional services is excluded because only some businesses need that coverage and it can be purchased separately. Auto liability is excluded because it is covered by a businessowners auto policy. Damage to your own property is excluded because it is covered by your property insurance.

The standard policy form does not provide coverage for a recall of products, work or impaired property due to a suspected defect, deficiency, inadequacy or dangerous condition. You may purchase a Product Withdrawal Expense Endorsement to cover some of this risk.

Endorsements To BOP Liability Coverage

Endorsements are additions to insurance contracts that change the coverage. Endorsements can add liability coverage for specific circumstances to the BOP. Among those most commonly added are:

  • Employment Practices Liability
  • Liquor Liability
  • Employee Benefits Liability

Special Coverages

Depending on the nature of your business and its risk exposures you may need one or more of the following types of liability coverages:

  • Umbrella Liability Insurance
  • Errors and Omissions Liability Coverage/Professional Liability Insurance
  • Directors and Officers (D&O) Liability Insurance

Do I need Professional Liability Insurance?               
Professionals that operate their own businesses need professional liability insurance in addition to an in-home business or businessowners policy. This protects them against financial losses from lawsuits lawsuits filed against them by their clients. Professionals are expected to have extensive technical knowledge or training in their particular area of expertise. They are also expected to perform the services for which they were hired, according to the standards of conduct in their profession. If they fail to use the degree of skill expected of them, they can be held responsible in a court of law for any harm they cause to another person or business. When liability is limited to acts of negligence, professional liability insurance may be called "errors and omissions" liability.  Professional liability insurance is a specialty coverage. Professional liability coverage is not provided under homeowners endorsements, in-home business policies or businessowners policies (BOPs).                

Source: Insurance Information Institute

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