How does small business liability insurance work?

Owners of small businesses can purchase business liability insurance in the form of a Businessowners policy, also commonly referred to as BOP. This is an ISO package policy specifically designed for small and medium-sized businesses, containing a personal property coverage and a third-party liability coverage, and resembling commercial general liability insurance.

Characteristics of Small Business Liability Insurance

• The small business liability insurance part of a BOP provides protection to the business owner if the latter is found liable for causing damage or loss to a third-party arising from the business owner's commercial activities. The business liability insurance provider promises to pay any damages to indemnify the injured party on behalf of the insured, which they are legally obligated to pay, up to the business policy limits.
• The business liability coverage of a Businessowners policy insures the business owner for third-party liability in the following events:
  • Bodily injury arising from the business operations of the insured business owner;
  • Property damage directly caused by the business owner's commercial activities;
  • Personal and advertising injury caused by the insured business owner, including defamation of character, false arrest, etc.
• In addition to the business liability coverage, a BOP contains a coverage for the medical expenses of others. It is important to note that this coverage is applied regardless of legal liability. This means that the liability of a small business owner need not be established in court, for the medical expense coverage of a businessowners policy to be applied. The injured party simply needs to report the incident within a year of its occurrence, providing documents of all the medical bills incurred.
• The provider of liability insurance for the small business agrees to defend the insured in court in the event of a liability case against them, and to pay all the legal defense fees involved in such a case.

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