Will my Costs Increase if I Have to File a Claim?

Business liability insurance is a useful safeguard for businesses of all sizes. If someone experiences injury or property damage at your workplace, you could be sued for negligence. Rather than risk paying a large settlement out-of-pocket, rely on business liability insurance to take care of the damages and your legal fees.

Many companies forgo business liability insurance because of the high cost of premiums. Like any insurance policy, claims history impacts your rates. If you have to make a claim, your rates will increase. In cases of exorbitant settlements, your insurance company could even refuse to cover you. Though the costs may be significant, it is prudent to consider business liability insurance a necessary cost of doing business; getting stuck paying for a lawsuit out-of-pocket could be detrimental to your company.

Filing a Claim

In the midst of an accident you want to be prepared to file a claim, especially if you do not have a human resources officer or risk manager to handle it. The first step is to always call emergency response if necessary. Next, call your insurance provider the same day. Delaying reporting the claim could affect your chances of having the claim honored.

The insurance company will send you a form to record details of the incident. If an employee was involved, he will need to write an incident report of all that he remembers. The business liability insurance provider may also ask for witnesses to make statements, just as they would in a police report. Your provider will then arrange for you to have an attorney if the company does not already have legal counsel. Your liability insurance will pay for your legal fees, as the insurer has a duty to defend the client.

The company should not contact the injured party in any way. Your attorney will handle the negotiation and can even settle the claim without your permission. Your insurance provider will take time to evaluate the claim fully, since it is in their interest to pay as little to the claimant as possible. If the claim cannot be settled, the claimant and your attorney may choose to pursue it in court.

If you are to appear in court, the lawyer will inform you of your court date. If an employee was responsible for the accident while not on official company business, he may be assigned separate counsel. For instance, if a truck driver in a company vehicle hits a car on a "frolic and detour," the suit may be more complicated. If the employee is charged with criminal acts, your attorneys will want to distance the company from the individual for the purposes of a criminal trial.

Following the trial, which includes a final chance for settlement, the judge will hand down a verdict and written judgment. The judgment enumerates how much the claimant can recover from your business. Without insurance, your equipment, building and other assets can be liquidated to pay the judgment. Here, business liability insurance becomes useful, as the insurer is obligated to pay the judgment up to your coverage limits as long as the incident is covered on your policy.

Your out-of-pocket hit will be far less with business liability insurance, but your monthly premium rates will increase after a judgment or settlement. They may level out over time, but be prepared to pay more for several years. If the insurance company refuses to renew your policy after you make a claim, you can seek insurance from another provider. Your claims history will follow you, so implement rules to ensure safety in the workplace and avoid these incidents.

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