No one plans to have an accident or a pandemic, but planning for the possibility of an event by having liability protections in place is part of operating a sound business. Maintaining business liability protections is important in mitigating the risk that your business can incur when an accident or catastrophic event happens.
What is Liability?
Liability refers to the state of being responsible for something, and business liability comes in a few different forms, both as financial and other legal responsibilities. All have power over your business. Typically, a business liability can be a common customer or client incident like bodily injury, property damage, or advertising injuries. Now, with COVID-19, liabilities include the spread of the virus to employees or customers, missing deadlines due to the virus, and wrongful terminations that are virus-based.
What is Liability Protection?
There are many ways to safeguard against business liability. Most people commonly think of business liability insurance when protecting a business. But, the type of company you create when starting a business, such as a limited liability company (LLC), also provides protection to liability.
Establishing an LLC
The only real way to protect yourself from the financial liabilities and legal liabilities of your business is to establish your company as a separate legal entity by creating an LLC. An LLC can absorb debts as separate from you personally. Using an LLC means that you will not be personally responsible for repaying the business’ debts. Additionally, an LLC can shield you in most cases from legal liabilities because the company is treated as a distinct legal entity that can be held responsible for negligence.
Purchasing Business Liability Insurance
Business liability insurance protects the financial interests of your company, and you, in the event that you face formal lawsuits or third party claims. This type of insurance covers direct financial liabilities you incur such as medical costs from an employee or customer who is hurt on the business property, as well as any legal defense expenses. There are 3 main types of business liability insurance:
- General liability insurance
- Professional liability insurance
- Product liability insurance
Some commercial business insurance policies benefit all businesses while others provide protections against risks for certain types of businesses. In all cases, small businesses need general liability insurance. This type of insurance provides protection for accidents that involve bodily injuries and property damage. Oftentimes, accidents lead to large legal bills that can impact the financial health of your company.
If your business provides work and services, you may want to secure professional liability insurance. This protection provides coverage when customers sue based on claims that the work was unsatisfactory. Some examples of liabilities covered are missing project deadlines, making omissions in your work, or providing ineffective business advice.
And, if your business produces a product(s), you need product liability insurance as well.
Many business insurance policies exclude communicable disease coverage such as damages related to COVID-19. However, professional liability coverage can protect you in a situation where a deadline wasn’t met because of the coronavirus. Additionally, an employment practices liability insurance (EPLI) could cover a wrongful termination lawsuit related to COVID-19.
Since the COVID-19 pandemic, the federal government has created two economic stimulus bills to help support businesses--the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the Health, Economic Assistance, Liability Protection and Schools (HEALS) Act. In March, 2020 the CARES act provided stimulus checks and a Paycheck Protection Program to mitigate layoffs. The HEALS act provides a second round of stimulus checks as well as liability protections for businesses.
In particular, the HEALS act “provides businesses, schools, and other institutions with favorable presumptions of good faith compliance with safety standards and guidance, and requires plaintiffs to prove gross negligence or willful misconduct to establish liability” (source: National Law Review). The bill also states that one of the main impediments to the flow of commerce from the COVID-19 crisis is the risk of litigation.
Contact Us for Business Liability Advice
If your business has suffered from lawsuits due to COVID-19-related events, or if you would like advice about putting liability protections in place, call us at (919) 228-4487 or fill out the contact form below. We can give you sound advice during these turbulent times. We serve Raleigh, Cary, Wake Forest, Rolesville, Apex, Garner, and surrounding communities.
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