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Inspiring Success on the Road to Recovery

Monday, January 5, 2015

What insurance coverage does your recovery business need?

By Nancy Germond, MA, SPHR, ARM, AIC, ITP

Insuring a sober living home, consultancy or treatment facility can often pose a challenge. Insurance is one area where business owners may try to cut costs. To protect your business and future assets, you need to have a highly qualified insurance agent evaluate all the risks you face and offer solid coverage solutions.
Even organizations that operate on tight budgets must protect themselves with at least two types of coverage. Let’s explore the coverages that are most important — professional liability and general liability. 

What does the professional liability policy cover?

Any professional consultant needs professional liability coverage, also called errors and omissions. The professional liability policy may be worded as follows:
“The company will pay on behalf of the insured any loss excess of the deductible not exceeding the limit of liability to which this coverage applies that the insured becomes legally obligated to pay because of claims made against the insured during the policy period for wrongful acts of an insured or because of personal injury arising out of wrongful acts of an insured.”
This wording shows the limited scope of the professional liability policy. The intent is to cover only negligent professional or “wrongful” acts. The policy also provides limited protection for personal injury, such as libel or slander, committed by the insured against a third party.

What does the commercial general liability (CGL) policy cover?

The CGL covers bodily injury to a person or damage to the property of others caused by an organization’s negligence. A CGL policy is not intended to cover the quality of a company’s advice or service. This helps constrain a contractor from low-bidding a job, performing poorly and then relying on the insurance carrier to cover that risk.
Look first at CGL policy language under the insuring agreement, the heart of the policy:
“We will pay those sums that the insured becomes legally obligated to pay as compensatory damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies.”
Here are a few of the exposures covered under the CGL:
  • Premises and operations liability for persons injured or items damaged while on your business premises or because of your business operations.
  • Additional insured coverage when you sign certain written contracts or agreements such as leases.
  • Tenant’s liability in the event your business operations accidentally start a fire in rented premises or cause some other type of damage. 
  • Defense for covered claims.
  • Bonds and court courts associated with a claim.
  • Limited financial remuneration when assisting your carrier in the defense of a claim.

In addition to bodily injury and property damage,CGL covers personal injury liability, libel and slander, as well as advertising injury. Coverage can vary widely from one company to another. An independent agent should help you determine the coverage differences and help you make strong choices to protect your growing organization.

What are some CGL exclusions?

Intentional injury – You are entitled to protect yourself. Carriers should defend a case of self-defense unless it appears the insured intended to inflict malicious injury.
Care, custody and control of property owned by others.
For the organization that keeps its clients’ property while they are in treatment, for example, some coverage may apply.

Liability arising from an aircraft, auto or watercraft — If you use any of those in your business, you’ll require specific coverage to protect your assets. However, if you provide an automobile to an employee who gets in an accident, you may have coverage, depending on the coverage form and the jurisdiction.

In today’s complex business environment, no organization that provides professional services should go without two types of coverage – professional and general liability — at a minimum. An experienced independent agent can help you ensure your business prospers in the coming years.  Find an agent who specializes in social service business and understands the unique exposures you face to ensure you get the best advice. 
 
Nancy Germond, MA, SPHR, ARM, AIC, ITP. Southwest Insurance Brokers, LLC. (602) 263-0777