Chapter 2: Building Your Business Protection Blueprint
Part 1: Basic Insurance Needs for Independent Architecture, Engineering, and Design Contractors
General Liability Insurance: Your Design Business's First Line of Liability Defense
General Liability Insurance is one of the most important coverages for self-employed business owners. It protects you from common third-party (i.e., non-employee) lawsuits over…
- Bodily injuries.
- Property damage.
- Personal injury (i.e., copyright infringement, libel, or slander).
Here are just a few indications that you may need to purchase a GL policy:
How GL Protects Your Commercial Office Space
General Liability Insurance's foremost protection is its premises liability coverage. In fact, this coverage is the very reason GL Insurance earned the moniker "slip and fall" insurance. It kicks in when a third party — such as a client, deliveryman, or guest — suffers a bodily injury on your property and blames your business for the injury.
For example, say one rainy afternoon, a prospective client drops by your architecture firm to discuss your services. On her way out, she slips on the slick tile floor. Because she says there was not proper signage that would have prevented her fall, she sues for medical damages.
General Liability Insurance covers lawsuits over bodily injuries, property damage, and advertising injuries.
GL and Your Client Contracts
Sometimes, your client contracts will require that you carry a certain amount of General Liability Insurance. That's because architects and engineers can be found liable for injuries that occur on a jobsite.
Different contracts charge you with different amounts of responsibility once a project gets to the construction phase. If your contract requires that you supervise construction to make sure workers uphold certain professional standards during a project, you could be held responsible (and sued) for any injuries that occur due to a failure to meet those standards. Be sure to carefully read your contracts to make sure you carry the required amount of coverage.
GL Protects Client Property against Loss or Damage
Whenever you leave the safety of your own office, there is a chance that you could damage someone else's property. If you do, your General Liability Insurance will help you reimburse the property owner.
For example, say you're meeting a client in his home to discuss an addition to his master bedroom. While there, you accidently step on his champion Pomeranian and break its leg. The dog will never show again, and your client sues you for damages.
GL Protects Home-Based Businesses
It's common for solo design professionals to operate out of their home. Just don't make the mistake of thinking that your Homeowner's policy will protect you if clients injure themselves at your home office. Even if your Homeowner's policy includes liability insurance, it typically excludes coverage for business-related accidents. (For more about the limitations of your Homeowner's policy, check out our infographic "Is Your Home-Based Business Covered?")
So say you run your interior design office out of the carriage house on your personal property. A client comes by to discuss a project. Unfortunately, she trips over a hose that was lying across the walkway, falls, and sprains an ankle. She sues you for medical damages, claiming that your carelessness caused her injuries. You'll want to have a GL policy in force to cover litigation costs and court-ordered compensation.
Most Homeowner's Insurance policies exclude coverage for business-related bodily injuries.
What Expenses Does GL Cover?
It's important to realize that every claim costs money — even fraudulent ones. In fact, you can expect to shell out $2,000 to $5,000 in legal defense fees for a lawsuit that is ultimately dropped, according to the U.S. Chamber Institute of Legal Reform's Tort Liability Costs for Small Businesses report [PDF].
If your business should face a General Liability claim, your coverage can help you pay for expenses such as…
- Legal investigation and defense.
- Medical costs.
- Other court fees.
Your insurance provider is obligated to pay for claims up to your General Liability policy's limits. To find out how to boost your coverage limits for bigger projects, jump to "Umbrella Insurance: More Coverage, Less Hassle."
$2,000 — $5,000: The average cost of legal defense fees for a meritless claim.
NEXT: Property Insurance: Insuring Your Engineering, Architecture, Drafting, and Design Business's Assets