Every business needs insurance of some kind, the reason is that no business is immune from civil liability lawsuits, it usually needs insurance to protect it.
Like any individual, a business can unintentionally cause damage to a third party. However, it is required in some countries that one must repair any bodily injury or material damage that one causes to others.
A customer, supplier, or any other individual or organization is entitled to sue a company which has caused him damage:
- if this damage results from a fault of the company, and
- if a link can be established between the fault and the damage.
When the financial loss is significant, the consequences of such a lawsuit can be dramatic.
It may be a direct financial loss in the event of damage to property. For a badly planted nail too close to an electrical cable, a contractor could be held responsible for the fire of a house he built. He would then have to rebuild the house at his expense.
Financial loss can also be fixed by a judge as a result of personal injury. For example, a merchant who neglects to deglaze the entrance to his store can be held responsible for the fall of a passerby. If the victim of the injury suffers from a permanent disability because of this fall, the damage caused is considerable.
The risks that a business poses to third parties can take many forms. We can think of visitors injured by the fall of an object in a store or warehouse; or a defective product that cuts or burns a user’s fingers.
The company is not only responsible for its own actions: it also assumes responsibility for faults committed by its subcontractors. An injured customer will return to the company that made him sign a contract and that he paid, even if the damage was caused by a supplier of this company. For example, a hardware store that sells flooring to a customer and has it installed by a subcontractor remains responsible for the installation to its customer.
Even needed for small businesses
Fire, accident: all serious risks which, when they occur, can jeopardize the financial health and even the viability of a business. Small businesses do not escape the risk of prosecution because they are less known or considered less wealthy. Only the financial value of the damage they can cause counts.
General liability insurance protects the business in two ways:
1. First, by helping the company to defend itself. In the event of a lawsuit, insurance covers defense costs. This financial assistance, important in itself, helps the company to assert its position in the litigation.
2. Then, if the company is found liable, the insurance pays the amount allocated to the victim of the damage.
Your representative assesses the amount to be covered by general liability insurance, taking into account the activity and the specific situation of the company. This amount corresponds to the maximum compensation that can be paid to a third party who has suffered damage. Lawyer’s fees and legal fees are reimbursed by the insurance in addition to this amount.
In addition to protecting the company, good general liability insurance can be essential in business. Many customers, starting with governments and public bodies, usually require all of their suppliers to have adequate liability insurance.
However, general liability insurance does not cover all the risks of damage that all businesses can cause. The exercise of certain professions, particularly those governed by a professional order, may require specific professional liability insurance. In addition, the personal liability of directors and officers of companies and non-profit organizations requires special insurance. Your representative will be able to advise you if you have such needs.
The content of this article does not constitute a legal opinion.