Saving Money on Liability Coverages
One way to save money on general liability insurance is to purchase a "broadening" or "extended coverage" endorsement. Many insurers offer such an endorsement. It is added to a general liability policy, and provides a variety of coverages at a reasonable price. A typical "broadening" endorsement contains many, but not all, of the coverages outlined below.
Bodily Injury and Property Damage Liability
Many of the coverages included in a "broadening" endorsement are amendments of Bodily Injury and Property Damage Liability (Coverage A).
Damage to Premises Rented to You
The standard liability policy covers claims arising from fire damage to premises you rent. It also covers damage by a peril other than fire to contents of premises you rent on a short-term basis. Many "broadening" endorsements include a higher limit (such as $300,000) than the $50,000 or $100,000 limit normally provided for this coverage. Some also extend fire damage coverage to include damage by lightning, explosion, smoke or leaks from automatic fire protection systems.
The standard liability policy covers claims stemming from the use of non-owned watercraft that are less than 26 feet long. Many endorsements broaden this coverage by increasing the length to 50 or even 75 feet.
Most claims arising from the use of aircraft are excluded under a typical liability policy. Nevertheless, some "broadening" endorsements add an exception to the aircraft exclusion for claims stemming from the use of aircraft chartered with a crew. Some endorsements require that the crew be paid, meaning they are not piloting the plane free of charge.
Expected or Intended Injury
Liability policies exclude bodily injury or property damage that is expected or intended from the standpoint of the insured. However, the exclusion contains an exception. Coverage is provided for bodily injury that results from the use of reasonable force to protect persons or property. Many endorsements extend this exception to include property damage as well.
Personal and Advertising Injury
Most "extended coverage" endorsements make few, if any, changes to Personal and Advertising Injury (Coverage B). However, some provide contractual liability coverage by deleting the contractual exclusion found under Coverage B. Moreover, some endorsements expand the definition of the term personal and advertising injury to include one or more of the following offenses:
- abuse of process (in conjunction with malicious prosecution)
- discrimination that is unrelated to employment
- humiliation that is unrelated to employment
- mental anguish, mental injury, or shock that results from another covered offense
Many liability extension endorsements amend Medical Payments coverage to include one or both of the following:
- Higher Limit Many endorsements increase the standard limit for Medical Payments (typically $5,000) to $10,000 or more.
- Athletics Activities Some endorsements either eliminate or soften the "athletic activities" exclusion found under Medical Payments.
Who Is An Insured
A number of the coverages included under "broadening" endorsements are extensions of the section entitled Who Is An Insured.
Newly Formed or Acquired Organizations
The standard liability policy automatically provides 30-day coverage for any organization (other than a partnership, joint venture or limited liability company) you (the named insured) acquire or form during the policy period, if your company owns at least 51 percent of it. Many insurers will extend the period of coverage to 60, 90, 120, or even 180 days.
Many liability "extended coverage" endorsements automatically cover certain parties as additional insureds. Generally, such parties are covered only if you have agreed, in a written contract, to include them on your policy as additional insureds. While the parties covered as additional insureds vary, many endorsements include one or more of the following:
- Managers or Lessors of Premises: Covers your landlord or a property manager of premises you have leased.
- Owners, Lessees or Contractors: Covers property owners (or lessees) or general contractors that have hired you to perform some type of work.
- Vendors: Covers sellers of products manufactured by you.
- Lessors of Equipment: Covers owners of equipment you have rented or leased to use in your business.
- State or Political Subdivisions: Covers government entities you are required to insure in order to obtain a permit to erect a sign, hold an event, or perform a certain activity on public property.
- Blanket Wording: Catch-all language covering any party you are required by a contract to insure.
Additional insured wording may contain pitfalls that are difficult to spot. For instance, some endorsements state that if the additional insured is sued, the insurer will pay no more than the limit stated on the policy or the limit required by the contract, whichever is less. Some endorsements cover the additional insured on an excess basis (meaning the additional insured's policy will apply first) unless the contract requires you to cover him or her on a primary basis. Other endorsements are broader, affording coverage to the additional insured that is primary and non-contributory, if you are required by the contract to provide coverage on that basis.
Fellow Employee Injuries
The standard liability policy contains a provision often referred to as the fellow employee exclusion. This exclusion eliminates coverage for claims by one employee against another. Some extended coverage endorsements remove this exclusion entirely. Others will amend the exclusion so it does not apply to your managerial or supervisory employees for acts they commit as an employee of your company.
Incidental medical malpractice coverage typically applies to nurses, emergency medical technicians, or paramedics employed by your business. It serves as backup coverage for medical professionals. It is not intended to be their main source of professional liability coverage. Incidental medical malpractice coverage does not apply if you are in the business of providing medical services.
The following coverages consist of modifications of certain policy conditions.
Blanket Waiver of Subrogation
This provision amends the subrogation clause found in the liability conditions. It typically applies when you have agreed, via a written contract, to give up your rights to sue a business associate. This party may be your landlord, or a company for which you are performing some type of work. The clause states that if you waived your right to sue that party, the insurer waives its right to sue that party as well.
Knowledge and Notice of Occurrence of Offense
The standard liability policy requires you to notify your insurer as soon as practicable (possible) of any occurrence or offense that may result in a claim. This clause can be problematic if an incident occurs, and an employee becomes aware of it, but fails to notify you. Obviously, you can't report an incident to your insurer if you don't know that it took place.
The "notice and knowledge of occurrence" wording typically states that you are obligated to notify the insurer of an occurrence or offense only when it becomes known to certain company principals. These may include you, if your business is a sole proprietorship, a partner, if your business is a partnership, or a risk manager at your firm.
Unintentional Failure to Disclose Hazards
General liability insurance applicants are expected to answer application questions honestly so the insurer can assess the applicant's risks accurately. If the insurer learns that an applicant lied or intentionally concealed important information about the company's risks on an application, the insurer might cancel the policy or refuse to cover a claim.
Nevertheless, many insurers will add "unintentional failure to disclose hazards" wording to the policy. Via this wording, the insurer promises that it won't penalize an insured for an unintentional failure to disclose hazards that existed at the beginning of the policy period. The insured must report the hazard to the insurer as soon as he or she discovers the error.
The following coverage is provided by amending a policy definition.
Many "broadening" endorsements extend the meaning of bodily injury, as that term is defined in the ISO liability policy. The most common extension is the addition of mental anguish as a covered injury. However, some endorsements also include one or more of the following:
- mental injury
Mental injuries are generally covered only if they result from physical injury, sickness or disease.