When you launch a small business, you experience a commercial climate driven by technology and employees.
5 liability risks you should know about when starting a small business
Your reliance on these resources and the products or services you plan to offer determines the liability risks you face and the insurance you need to meet them.
1. Injured workers
In 2014, an estimated three million employees suffered non-fatal workplace and work-related injuries. Job-related fatalities number 4,812 in 2014. An estimated 12 workers per day die while working.
When you hire a certain number of employees, you become responsible for any on-the-job injuries they incur. Workers’ compensation laws allow employees injured while performing their job duties to recover medical expenses and lost wages, or a portion thereof, based on the level of resulting disability. The survivors or heirs of workers who are killed on the job may recover benefits.
Workers’ compensation insurance affords coverage for the benefits and expenses that a business must pay due to on-the-job injuries.
2. Liability for accidents caused by workers
You’re responsible for injuries and damage people suffer at the hands of your negligent employees. Motor vehicle accidents caused by drivers on the job constitute a major source of vicarious liability.
Under this theory of law, you must answer for the wrongful acts of your employees, regardless of your own lack of fault.
The use of wireless devices by employees can lead to distracted drivers and motor vehicle wrecks. The National Highway Traffic Safety Administration places the 2014 death toll from distracted driving at 3,179, almost 10 percent of all traffic fatalities. Distracted driving affected or contributed to 431,000 non-fatal injuries in 2014.
In 2012, a jury placed a 19.8 million euro ($22 million dollars) verdict against a major soft-drink company whose truck driver was making a business call on the cellular phone. The victim suffered significant spinal injuries and was awarded over 10 million euros ($11.5 million) for medical expenses and pain and suffering.
The company was hit with 9 million euros ($10 million) in punitive damages. The victim’s lawyers argued that the soft-drink company allowed employee drivers to use hands-free devices despite evidence that showed hands-free devices did not reduce distracted driving.
3. Products liability
Your business can face liability for manufacturing or selling defective goods that injure others.
Products liability can arise, for example, from negligently designing or making the product so that it is unsafe, failing to warn customers of product dangers, or failing to use care before putting it on the market.
State laws limit the time within which an injured party can sue, often running from the date of the injury or the date of manufacture. In many cases, the time to sue can expire before the person is injured.
4. Errors and omissions liability
If your small business involves the performance of professional services, such as legal, medical, veterinarian or engineering, you will likely need errors and omissions liability insurance, sometimes called professional liability insurance.
The potential malpractice varies by profession. For instance, attorneys can be sued for missing deadlines that result in dismissal of their client’s cases. Malpractice claims against physicians involve inaccurate or improper diagnoses or treatments.
In some countries, professionals are required to carry professional liability insurance in order to practice.
5. Cyber liability
Engagement online retail, automated investing and other e-commerce transactions carries the risk of data breaches. Failing to keep your customers’ credit card, financial and other information secure from hackers may expose you to cyber liability.
Damages may include items such as loss of privacy and attorney fees incurred by identity theft victims.
Also, cyber attacks can create other liabilities beyond those related to identity theft. A computer or application disabled because of a virus or malware prevents you, for instance, from fulfilling orders and accessing medical information to make informed diagnoses or treatments.
Generally, you’ll need cyber liability insurance rather than general commercial liability coverage for these risks.
Free insurance quotes are available as you consider the risks your new venture might face and how you can prevent liabilities from derailing your business dreams.