What are some exclusions from liability policies?
A general liability policy pays those sums that the insured becomes legally obligated to pay because of injuring someone’s body or damaging others’ property in the conduct of your business. Some are insurable by separate coverage, like workers’ compensation coverage. An example of an uninsurable area is an intentional act, in which you plan and carry out an intentional injury to others. Another example of an exclusion from liability policies is liquor liability. Most companies would not need it, but if you are a tavern owner, you would need to purchase separate coverage, because that is your business. To further confuse the issue, some insurance companies will offer additional enhanced coverages that give you some coverage back for excluded items.
How does enhanced coverage work?
Say your policy excludes liquor liability. That’s OK if you don’t sell liquor. But if you have Christmas parties, or entertain vendors or suppliers by buying them lunch, does that mean you don’t have coverage for alcohol in that situation? Under your general liability policy, you should have what’s called host liquor liability coverage. It’s not your business to distribute liquor, so insurance companies will give coverage back for incidental host situations.
It’s confusing. Insurance companies give coverage and take it away.
How can businesses find these exclusions in their coverage?
It is the responsibility of anybody who purchases insurance to read and be familiar with the provisions of the contract. That’s why you should make sure your insurance agent or broker is familiar with your business, so he or she can do a better job of analyzing your coverage needs. What a shoe store owner needs might not be necessarily the same for a publisher, for instance.
The agent or broker needs to understand the business and make sure that insurance policies are modified to provide the necessary coverages that the customer chooses to purchase and should protect business for property liability along those lines. It is the insurance company’s responsibility to show where coverage does not apply. Agreements state what’s covered and what is not. Then, enter limitation or exclusion areas, then enhanced areas.
That’s part of the competitive edge certain insurance companies claim over others. If one company gives you $10,000 of water backup coverage, another may give you $25,000. Not only do companies compete over pricing, they also compete in the coverage provisions by offering additional coverage of areas of exclusions or limitations. It requires an understanding of the policy that is purchased. That is why a close relationship with your agent or broker is so important.
Rick Theders is CEO of Clark-Theders Insurance Agency. Reach him at (513) 779-2800 or [email protected].
