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9 Big Risks of Going Without Commercial Liability Insurance

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9 Big Risks of Going Without Commercial Liability Insurance
With high inflation and the cost-of-living crisis, many businesses are trying to cut their expenses where they can. One steady cost that can amount to several hundreds of dollars a month is insurance. But can companies cut out commercial liability insurance, or is this a dangerous move? The answer is that most businesses need a policy because it protects them from expensive lawsuits and improves their reputation. 

Companies in all kinds of industries get sued, for example because someone has an accident on their premises, a customer’s property gets damaged, or because they make a false claim when advertising. If the business doesn’t have insurance, they could face bankruptcy due to the high costs of legal advice and the compensation they owe the plaintiff. What’s more, it’s harder for uninsured companies to gain new business partners and customers.

9 Big Risks of Going Without Commercial Liability Insurance

1. You Could Be Sued for a Personal Injury

The most important reason why people get liability insurance is that they want to protect themselves from an expensive lawsuit. We live in a litigious society, so businesses can and do get sued for a wide range of issues. The most expensive one is a personal injury, which could be a slip-and-fall accident, medical malpractice, or similar. When a customer or client gets hurt while on your premises or while working with you, they can sue you for damages.

You might have to pay for their medical bills, their therapies, their loss of income, and even their pain and suffering. The average personal injury settlement amount is $62,000, but you might have to pay a lot more if the person was seriously hurt or if they passed away. In fact, some cases result in six or even seven-figure settlements, which can put even a larger company out of business.

2. You Could Be Sued for Property Damage or an Advertisement 

Personal injury lawsuits are the most common type, but there are other reasons why you might be sued by a client. For example, they can ask you to pay compensation if their property got damaged while you are working with them. But even if your business is entirely remote and nobody visits you at a physical location, you might have to get liability insurance, especially if you advertise your services.

Big companies like Uber, Dannon, VW, Red Bull, New Balance, and Kellogg have all lost millions of dollars due to false advertising claims. Some of them had to go to court, and others settled with the plaintiff. While a large business can absorb the cost of a well-publicized lawsuit, a small company will struggle when faced with such an event. For this reason, it’s best to get insured as soon as you start advertising online and in print or seeing customers in person.

3. You Could Have High Legal Bills 

Successful lawsuits get a lot of publicity, so people think that it is easy to win compensation, even after a small incident. That’s why they are more likely to sue you now than in the past. Fortunately, many of the lawsuits brought against professionals don’t result in compensation, so there is a big chance that you won’t have to pay, especially if there is little evidence that you are guilty of negligence.

However, this doesn’t mean that you won’t spend money while the lawsuit is ongoing. Companies often have to pay thousands of dollars to their lawyers, even if they haven’t done anything wrong. Liability insurance can cover the cost of legal help as well as compensation, so it will protect you, no matter if you’re innocent or guilty.

4. Some Companies Might Not Work With You 

Many businesses earn some or all of their income by collaborating with other companies. For example, various kinds of contractors have to collaborate to build a house or apartment block, and many manufacturers produce goods that are sold to and assembled by another company. If you don’t have the right insurance in place, many medium-sized and large companies might refuse to work with you.

This is because they are worried about the potential of a lawsuit and how this would affect their own operations. They might also be concerned that you aren’t a reliable business partner. Although commercial liability insurance can cost hundreds of dollars a year, it’s likely that you will make more money because you’ll have a much easier time finding partners.

5. Many Customers or Clients Won’t Hire You 

Many customers or clients are reluctant to hire anyone who doesn’t have the right kind of insurance because they don’t want to put themselves or their property at risk. Getting insurance protects you, but it also reassures your customers that they will receive compensation if something goes wrong unexpectedly. For example, a contractor working on someone’s roof might accidentally cause damage to the building’s structure. 

If they aren’t insured, they might not have the financial means to pay for the necessary repairs. This puts the customer in a difficult situation because they weren’t expecting the extra cost of fixing their building. In contrast, a contractor who has insurance will be able to make a claim and help the customer pay for the damage. When faced with this choice, almost everyone will pick the professional who has liability insurance.

6. You Might Spend a Lot of Time and Energy on a Case 

A lawsuit will take time and energy, no matter if you have insurance or not. But when you’re protected, you can rely on your insurance company to help you at every stage. What’s more, you won’t have to worry about hiring a good lawyer because your policy will pay for them. This makes it much easier for you to keep your business open while the lawsuit is ongoing. 

Your insurers will handle a lot of the tasks related to the case. They might offer the plaintiff an initial settlement amount, and they will help you to negotiate. What’s more, knowing that you are protected takes some of the pressure off you and stops you from worrying about the future. No matter what happens, you know you won’t be bankrupted by your case.

7. Your Reputation Might Be Damaged 

A lawsuit related to personal injury, property damage, or false advertising could significantly affect your reputation in your community. You might no longer be seen as a trustworthy business, especially if someone got hurt at your premises or someone is claiming that you lied in one of your advertisements. But as mentioned above, people sue businesses even when the damage is very minor or when the incident wasn’t the owner’s fault. 

If you didn’t act negligently but are still being sued, your insurance company and your lawyer can help you to fight the claim. This clears your reputation and allows you to move on from the lawsuit. People who don’t have insurance often have a harder time restoring their reputation because they might not have the financial resources to hire a good lawyer, so they won’t be able to fight for their rights.

8. You Might Break the Law 

In some industries and areas of the law, getting liability insurance isn’t a requirement, so you’re unlikely to face legal consequences if you don’t take out a policy. But there are special cases, and you have to check carefully what the rules and regulations are in your area. Otherwise, you might be breaking the law, and you could face a hefty fine or even imprisonment. 

Almost every business in the US has to have workers’ compensation insurance, which protects against lawsuits filed by employees. Additionally, some states require certain professions, such as real estate agents, to take out professional liability insurance. Businesses like restaurants and bars also have to purchase liquor liability insurance if they want to sell alcohol to customers.

9. You Might Have to Shut Down 

Around one-quarter to one-third of businesses don’t reopen after a large natural disaster like a storm or a hurricane that causes property damage. After a lawsuit, things are even worse because your reputation has been damaged, and you might have had to pay hundreds of thousands or even millions in compensation. If you’re not insured, such an event could cause your business to go bankrupt. 

Don’t underestimate the danger lawsuits present to companies. Although you might not think that you will be targeted, it’s likely that you or someone on your team will be sued at some point. For instance, almost half of all physicians aged 55 and over have had at least one lawsuit filed against them, and around 90% of small businesses are sued in their lifetime. Don’t let a lawsuit ruin your chances of success.

Commercial liability insurance exists to protect businesses from lawsuits related to personal injuries, property damage, false advertising, and more. Not taking out insurance is dangerous because it puts businesses at risk. If you get sued, you might have to pay high legal fees and compensation. Call us at ISU Armac to speak to an agent about the kind of insurance you need and to get the best quotes in your area.