Liability insurance protects your company in case it is sued or held legally liable for injury or loss caused by negligence. The development of your risk management plan (reports) as part of your business insurance plan will limit the risk of error; however, that risk cannot be eliminated. Liability insurance covers the business for this risk.

For small businesses, many insurers package liability insurance into a larger insurance policy including property and casualty insurance. Most insurers call this packaged policy the “business insurance” or "Business Pack". Your business may be better served by a separate commercial public and products liability liability policy such as our Pest Control Policy. The coverage afforded by a tailored policy is more specific to your business activities.
 

There are two types of liability policy:

• Claims Made – The insurer that covers your business when the claim is made is the insurer that will cover the claim.
• Occurrence – The insurer that insures you at the time of the occurrence is the insurer that will handle the claim. The insurer is obligated to work with you until the claim is resolved even if you do not renew your policy with the insurer.

The liability policy provides coverage for damage from an “occurrence” during the policy period caused by your negligence. An “occurrence” generally means “accident” occurring to a third-party (someone other than you, your employees or the insurer). This can be property damge or injury relating to a third party.

What is Not Covered
What is covered under your liability policy is a function of the substantive state law of your state. One state's courts may rule that a liability policy covers a particular occurrence, while a neighboring state rules it does not. There are some types of occurrences that are not covered and are excluded from the definition of occurrence across all liability policies:

• Injury to a Worker- Workers are covered by workers’ compensation insurance and workers are not “third-parties” and, therefore, worker injury is not covered.

• Vehicle Liability – Damage or loss caused by a company vehicle is covered by a commercial auto policy specifically sold separately from the liability policy.

• Damage to Business Property – Damage to business property or location is covered by your property and casualty insurance and your business is the “first-party” and liability coverage only applies to third-party claims.

• Products Completed Coverage – Liability policies do cover loss or damage caused by a completed product or service in most cases as long as there is a products-completed operations clause in the policy. Liability policies do not cover loss or damage due to the costs associated with the removal of a product or a recall of the product. There is separate coverage for that situation called product withdrawal coverage.


Understanding Limits
There are two types of limits in a standard liability policy:

• Single Occurrence Limit – This is the limit the insurer will pay on one occurrence. 

• Aggregate Limit – This is the maximum amount the insurer will pay during any policy period for all of the occurrences in the policy period. Generally, this is two times the single occurrence limit.

The Insurer has two duties in the event of a claim. The insurer has a duty to defend your company and a duty to indemnify. Indemnify means to pay the claimed loss. The duty to defend your company is the duty of the insurer to pay for your legal representation and all associated costs.

The limits in your policy may be inclusive of defence costs or defence costs may be outside of limits. You want to have a clear understanding of how your policy works. If you have a $500,000 single limit and that amount is to include defence costs, then your limit could be substantially reduced by the costs and fees associated with your defence.

Keep in mind that your aggregate limit is your total amount of insurance for the policy period. You will want this number to be a realistic reflection of your company's exposure to risk. Generally speaking most Pest Control businesses currently have $5,000,000 and this increases depending on the size of the business or contracts. Typically shopping centres, government and defence forces require $20,000,000 Public Liability and $1,000,000 Professional Indemnity.