Doing business with the United States government offers a plethora of rewards but can also involve some risk. When a government contractor is held responsible for another party’s property damages or losses, the contractor could be required to pay a sizable sum of damages or compensation to the plaintiff. Business liability insurance is designed to protect a company’s assets and pay for certain legal obligations, such as medical expenses, court costs and administrative fees.
What Is Liability Insurance And What Does It Cover?
Business liability insurance covers common lawsuits that may arise from everyday business activities. Median costs for a business liability lawsuit start at approximately $54,000 according to courtstatistics.org. This number can rise substantially depending on the extent of the damages. Most government contractors do not have the resources needed to cover a liability claim, and without liability insurance coverage, a business would be responsible for paying these costs out of pocket.
Liability insurance protects against damage to customer property, customer injuries and accusations of copyright infringement and defamation. A standard liability insurance policy provides coverage for the following:
- Third-Party Bodily Injury – If a client or customer is injured in an accident that involves the business, liability insurance can help pay for the victim’s medical expenses. Liability insurance can also cover legal expenses if a customer sues over a sustained injury.
- Third-Party Property Damage – Liability insurance can cover expenses to replace or repair customer property that was accidentally damaged by a business.
- Product Liability Coverage – Customer injuries and third-party property damage are not limited to business premises. Government contractors that manufacture, distribute or sell products can be sued over the harm that the products cause to people or property.
- Advertising Injuries – If a business owner or employee is sued for libel, slander or copyright infringement related to the business, liability insurance can help pay for any legal expenses that result from the suit.
What Does Business Liability Insurance Not Cover?
While liability insurance provides government contractors with comprehensive coverage, there are some things it does not cover. This includes the following:
- Professional Errors – Lawsuits that stem from professional errors are not covered by liability insurance. Instead, a government contractor requires professional liability insurance (errors and omissions insurance) to cover mistakes such as missed deadlines or undelivered services.
- Damage to Business Property – When business property is damaged due to an event including a storm or fire, it can lead to hefty repair costs that are not covered by liability insurance. A business owner’s policy, which combines commercial property insurance and general liability insurance, can help cover these costs.
- Employee Injuries – Employees that become injured on the job are often entitled to compensation. Workers’ compensation insurance is required by government contractors to cover medical bills, physical therapy, lost wages and other damages for employees.
- Employee Discrimination Lawsuits – If an employee files a discrimination claim against a business, it can have a significant financial burden on a business, even if the company is found not guilty. Employment practices liability insurance (EPLI) can cover expenses relating to discrimination, harassment and wrongful termination.
- Vehicles Used by a Business – Business liability insurance does not typically cover accidents that occur in vehicles used by a business. Instead, a government contractor should carry commercial auto insurance to protect personal vehicles used for work purposes.
Why Should Government Contractors Carry Liability Insurance?
No government contractor is impervious to risks such as third-party bodily injury and property damage. For this reason, most government contractors should carry liability insurance. There are many benefits of acquiring a liability insurance policy.
1. Close More Contracts
One of the top reasons to acquire liability insurance relates to compliance. Many government agencies require contractors to carry liability insurance before they will enter into a legal contract with them. If a government contractor regularly places bids on government contracts, having a liability insurance policy can help ensure that these contracts close successfully while keeping these contractors ahead of the competition.
2. Protect Against The Unexpected
No business ever expects to face a lawsuit but accidents can happen at any time. Liability coverage provides businesses with protection against a wide range of risks. It can also give business owners peace of mind.
3. Avoid The Financial Repercussions Of A Data Breach
Data security is critical for all businesses in this day and age, but especially for government contractors that manage sensitive information. If a business keeps confidential data, such as customer names, addresses and social security numbers, having coverage is essential. Cyber liability insurance is a type of liability coverage that protects against cyber threats.
4. Guard Against The Actions Of Employees
Unfortunately, businesses are often held responsible for the actions of their staff. When incidents occur that involve libel, slander or copyright infringement, a claim may be brought upon the company. Liability insurance helps protect against these types of claims filed by third parties.
5. Demonstrate Responsibility
Carrying liability insurance communicates to customers and clients that the business is responsible and willing to assume liability if an accident should occur on the job. Having the proper insurance policies also shows that the business has the customers’ best interests in mind.
6. Signify A Long-Term Commitment
In addition to demonstrating responsibility, carrying liability insurance shows that the contractor is established and intends to be in business for a long time. Most prospects and clients will see that the contractor is not willing to risk a lawsuit that could potentially threaten the future of their business. Liability insurance helps establish trust between contractors and clients. Satisfied clients will be more likely to recommend a contractor that has insurance.
Speak With A Premier Benefits Consultant At BBG
Liability insurance can bring value to government contractors beyond the liability protection. The proper business coverage signifies that the business is legitimate and is willing to take the necessary steps to protect against costly lawsuits. To learn more about why government contractors should carry liability insurance, or to speak with an experienced benefits consultant about insurance options, contact the experts at the Business Benefits Group.