Cover Your Assets - Insurance 101

I’ve received some questions from a number of clients over the past few weeks on the subject of insurance coverage.  In addition, there have been some discussions in some Facebook groups where this topic is getting some traction. It seems like there’s an emerging trend in many contracts where the contract requires some level of liability insurance coverage in the contract.

The reason why having appropriate insurance coverage is so important is that you’ve worked hard to build a valuable business. You don’t want a misstep or mistake to strip the value out of your business. Additionally, since many contracts may now require insurance coverage, it’s a good idea to keep up with the changes. Given that many people don’t really understand or speak the language of insurance, this can get pretty confusing pretty fast. Although this post is a bit long and has a lot of “legal” like stuff going on, it will help you get up to speed on what kinds of insurance coverage you may want or need.

First, in order to understand what we’re really talking about, let’s briefly review the kinds of activities that may get you sued and for which you may want insurance coverage.

POTENTIAL AREAS OF LIABILITY

Defamation. Defamation is any communication that wrongfully damages another persons reputation or livelihood. Libel is a written defamatory statement and slander is a spoken defamatory statement. If you make a false statement about another person, and that false statement damages their reputation or livelihood, it may be considered defamation.

Copyright Infringement. Copyright infringement is simply using materials owned by someone else without their permission. Copyright infringement is probably one of the most common problems that you can run into and something that I deal with on a regular basis. If you use a picture, video, or text that belongs to someone else, and you don’t have permission, you may be in trouble. If you don’t know where every single thing you post came from, you may have some exposure here.

Advertising Issues. You’re probably aware of the current requirements for FTC disclosure requirements. However, it’s easy to make a mistake and get it wrong. This is an area of exposure where the FTC is quite active if you make a mistake. Some general insurance policies will cover claims like these but some policies don’t. You should review your policy to make sure you know EXACTLY what is covered and what is not.

GDPR/Privacy. We’ve all been inundated by the privacy issues associated with protecting personal information that you gather and store via your website or other sources. Is your privacy policy up to speed? Is the personal information you gather and stored properly protected and is your use of the personal information legit? If not, this could be a problem area.

Trademark Infringement. Trademark infringement is the unauthorized use of a trademark or service mark (or a substantially similar mark) on competing or related goods and services. One of the areas where trademark infringement can occur is advertising with Google AdWords, Facebook ads, etc. Things like comparative advertising make it even trickier. If you’re posting, tweeting, vlogging, or pinning about commercial products, you should consider whether or not you might need coverage for this aspect of your business.

TYPES OF INSURANCE COVERAGE

General Liability. General liability or “GL” insurance is basic business insurance that can protect your business from a variety of claims including bodily injury, property damage, personal injury and others that can arise from your business operations. For most businesses, this is a starting point and is likely a good idea to have in place. However, for influencers and bloggers, it may not be enough.

Umbrella. Commercial umbrella coverage is a supplemental coverage that can be added to your General Liability coverage policy. The umbrella policy provides an extra layer of liability protection by covering costs that go beyond your GL liability coverage limits. In other words, commercial umbrella insurance complements your other liability coverages by taking over when your other liability coverage limits have been reached. Adding an umbrella policy can be a very good idea because it’s usually very inexpensive.

Home-based Business Insurance. Many business owners operate a business from their homes. Unfortunately, many homeowners policies don’t cover home-based businesses in the way commercial insurance does. If you’re operating your business out of your home, ask your insurance agent for additional insurance to cover your equipment (computer, camera, printer, etc.) and inventory (if you’re selling items on Etsy or eBay, for example), and related exposure you may face in the event of fire, theft, or other problems.

Product Liability. If you’re selling products in the marketplace, You should seriously consider some type of product liability insurance. Even a business that takes every measure possible to make sure its products are safe can find itself named in a lawsuit due to damages caused by one of its products. Product liability insurance works to protect a business in such a case, with coverage available to be tailored specifically to a specific type of product.

Errors and Omissions (“E&O”).

Errors and omissions insurance is a form of liability insurance. It protects companies against the costs of a claim made by a person or company against a professional who provides advice or a service such as a consultant, financial adviser, insurance agent, or a lawyer. If you’re giving opinion advice and recommendations that people will rely on for important decisions, this kind of coverage may be a good idea.

OTHER THOUGHTS

Everyone operating a business should consider having a business structure (limited liability company, S-corp, etc.) in place to operate their business. If done properly, your business structure can help to isolate your personal life from your business operations and serve as a protection for your personal assets. If you haven’t set up a formal structure for your business, talk it over with your attorney and see what steps you need to take.

Since many people run their business from home, you may want to check your homeowners policy to see what kind of insurance coverage you have. It can be fairly inexpensive to add a general umbrella policy to your existing homeowners policy and it may provide some protection. You’ll want to examine your specific policy coverage and discuss the coverage with your insurance agent.

So, with all of this information swirling around in your brain, do you really need insurance and, if so, what kind of insurance do you need? Since every situation is different, there’s no easy answer except every business should evaluate their specific situation and discuss it with their attorney and insurance agent to ensure that they have the appropriate insurance policies in place. Use this information as a guide to evaluate your potential liability and then get the coverage that you need.

Bottom line? If you’re running a business, you should act like a business and take the steps necessary to protect your personal life as well as your business. The good news is that basic insurance coverage is easy to put in place and doesn’t have to break the bank so don’t be afraid to take the next step!

 Disclaimer – Yes, I’m a lawyer, but I’m not your lawyer. All information in this post is provided for educational purposes only and should not be considered legal advice for any specific person or specific situation.

Remember – Be Smart. Be Legal