It’s tempting to think you’ll never get sued, but lawsuits are part of the business landscape. And when a small business is sued, the costs can be devastating. A 2005 study by the Small Business Administration found that a lawsuit costs between $3,000 and $150,000 for a small business. In today’s dollars, that’s closer to $4,000 to $190,000.
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General Liability Insurance provides coverage for customer injuries, customer property damage, and lawsuits relating to both of these. It can help pay for immediate medical expenses as well as legal costs if an incident leads to a lawsuit. It’s usually the first policy small-business owners purchase because they often need it to sign commercial leases and client contracts.

A General Liability policy can help pay for lawsuits over:

  • Third-party bodily injuries.
  • Third-party property damage.
  • Product liability.
  • Advertising injuries.

If customers, clients, vendors, subcontractors, or other non-employees sue you over the reasons listed above, the insurance company can cover the cost of the lawsuit, paying for:

  • Legal teams to represent your small business.
  • Witness fees.
  • Evidence costs.
  • The judgment or settlement (the final amount of damages you owe the other side).

General Liability Insurance is an essential safety net when you don’t have deep pockets because it can provide funding when things go wrong.

 

“Mayra and the Keystar Insurance team were a pleasure to work with! They were extremely prompt and efficient in getting quotes to me. Once they helped me choose the best options for my business, they got my policy completed right away! Even after the policy was completed, they went a step further to go over future options for a more detailed policy to make sure I was covered in every scenario. I’ll definitely be using Keystar for all of my Insurance needs in the future!”

– Jade Dasaa, J. Bee Boutique

“Tania from Keystar Insurance has saved us a lot of money while providing us with an impeccable customer service. It is a pleasure doing business with you and we hope we can continue to grow together. My sincere thanks!”

– Miguel, Master Lightning

Small Business Lawsuit Examples

Property Damage Lawsuit

 
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Customers or clients can file a lawsuit against your small business if they believe your negligence caused damage to their property. Keep in mind that property damage protection under a general liability policy is only for a third party’s property, not your own. For example, you own a landscaping company. One of your employees drives a truck used for hauling away dead vegetation onto the client’s property. They start to take the truck onto the lawn, ignoring the fact that there was a heavy rainfall yesterday. The truck gets stuck in the mud. As the driver attempts to free the truck, the wheels spin mud and debris everywhere, including through the windows of the client’s home. Several windows are broken, and there is now mud clumped on their living room carpet. The client can sue your company for property damages to the windows and flooring. In total, they are suing for $10,000 to replace everything. General liability insurance would protect your landscaping company from having to pay the legal costs out of pocket.

Personal Injury Lawsuit

 
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Unlike property damage and bodily injury, the personal and advertising injury component of a general liability policy can be much more confusing. Sometimes it’s hard to understand what it covers, but it actually protects against a wide variety of incidents related to slander, libel, malice, detention, invasion of privacy, and copyright infringement to a third party. Small business owners need to be quite cautious with how they interact with customers and other businesses, and having a general liability policy with this type of protection is essential.

For example, you are a hotel owner. One particular guest has stayed at your establishment for four nights. They have been rowdy, and there have been complaints from other guests about the noise level. You assume that their past behavior makes it likely that they will try to leave without paying. So, on the day of their checkout, you have your security staff prevent them from leaving through the front door. You try to hold them in the hotel until they agree to pay for the four-night stay. The hotel guest can file a lawsuit against your hotel company for keeping them against their will. As part of the personal injury component of your general liability insurance, you will be protected against having to pay for all of your legal fees out of pocket.

Bodily Injury Lawsuit

 
Read Scenario
As a small business owner, there are certain laws and regulations you are obliged to follow in order to provide a safe environment for your customers. If a client were to injure themselves on your property, they could sue you for negligence. General liability insurance only covers injury to third parties, like customers or other individuals who have set foot on your property. (For protection against employee injuries, consider purchasing worker’s compensation insurance.)

For example, you run a day spa that offers clients a wide variety of services, including hair styling, massages, makeovers, waxing, and laser treatments. On one occasion, a customer requested a laser hair-removal treatment. You bring them back to the room that has the proper equipment and tell them to have a seat. As the customer makes their way across the room to sit down, they trip over the cord for the hair-removal machine. Their fall results in several broken bones. In their lawsuit, they request reimbursement for their medical bills, their pain and suffering, and lost wages from having to miss several weeks at their job. Thankfully, a general liability policy will help to pay for each of these costs.

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Advertising Injury Lawsuit

 
Read Scenario
The second aspect of the personal and advertising injury coverage is protection against anything that you say or do that harms or infringes upon the rights of another business. This can include using another company’s slogan or symbol for your own business, making false claims against another company, exposing private information, and much more.

For example, you run a nail salon. You have several competitors in the area and are worried about losing potential clients to the other salons. So, you decide to run an advertisement in the Sunday paper. In the ad, you mention two of the other nail salons. You claim that your company’s services are superior because, unlike the competitors, your salon is clean, inviting, and creates stylish nail designs. Your competitors could file a lawsuit for libel, which means that they claim your ad damages their reputation. The personal and advertising injury protection within your general liability insurance will help to cover the legal costs.

Property Damage Lawsuit

 
Read Scenario
Customers or clients can file a lawsuit against your small business if they believe your negligence caused damage to their property. Keep in mind that property damage protection under a general liability policy is only for a third party’s property, not your own. For example, you own a landscaping company. One of your employees drives a truck used for hauling away dead vegetation onto the client’s property. They start to take the truck onto the lawn, ignoring the fact that there was a heavy rainfall yesterday. The truck gets stuck in the mud. As the driver attempts to free the truck, the wheels spin mud and debris everywhere, including through the windows of the client’s home. Several windows are broken, and there is now mud clumped on their living room carpet. The client can sue your company for property damages to the windows and flooring. In total, they are suing for $10,000 to replace everything. General liability insurance would protect your landscaping company from having to pay the legal costs out of pocket.

Personal Injury Lawsuit

 
Read Scenario
Unlike property damage and bodily injury, the personal and advertising injury component of a general liability policy can be much more confusing. Sometimes it’s hard to understand what it covers, but it actually protects against a wide variety of incidents related to slander, libel, malice, detention, invasion of privacy, and copyright infringement to a third party. Small business owners need to be quite cautious with how they interact with customers and other businesses, and having a general liability policy with this type of protection is essential.

For example, you are a hotel owner. One particular guest has stayed at your establishment for four nights. They have been rowdy, and there have been complaints from other guests about the noise level. You assume that their past behavior makes it likely that they will try to leave without paying. So, on the day of their checkout, you have your security staff prevent them from leaving through the front door. You try to hold them in the hotel until they agree to pay for the four-night stay. The hotel guest can file a lawsuit against your hotel company for keeping them against their will. As part of the personal injury component of your general liability insurance, you will be protected against having to pay for all of your legal fees out of pocket.

Bodily Injury Lawsuit

 
Read Scenario
As a small business owner, there are certain laws and regulations you are obliged to follow in order to provide a safe environment for your customers. If a client were to injure themselves on your property, they could sue you for negligence. General liability insurance only covers injury to third parties, like customers or other individuals who have set foot on your property. (For protection against employee injuries, consider purchasing worker’s compensation insurance.)

For example, you run a day spa that offers clients a wide variety of services, including hair styling, massages, makeovers, waxing, and laser treatments. On one occasion, a customer requested a laser hair-removal treatment. You bring them back to the room that has the proper equipment and tell them to have a seat. As the customer makes their way across the room to sit down, they trip over the cord for the hair-removal machine. Their fall results in several broken bones. In their lawsuit, they request reimbursement for their medical bills, their pain and suffering, and lost wages from having to miss several weeks at their job. Thankfully, a general liability policy will help to pay for each of these costs.

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Advertising Injury Lawsuit

 
Read Scenario
The second aspect of the personal and advertising injury coverage is protection against anything that you say or do that harms or infringes upon the rights of another business. This can include using another company’s slogan or symbol for your own business, making false claims against another company, exposing private information, and much more.

For example, you run a nail salon. You have several competitors in the area and are worried about losing potential clients to the other salons. So, you decide to run an advertisement in the Sunday paper. In the ad, you mention two of the other nail salons. You claim that your company’s services are superior because, unlike the competitors, your salon is clean, inviting, and creates stylish nail designs. Your competitors could file a lawsuit for libel, which means that they claim your ad damages their reputation. The personal and advertising injury protection within your general liability insurance will help to cover the legal costs.

4 Ways General Liability Insurance Protects Your Business

Third-Party Bodily Injury

If a customer is hurt on your property, General Liability Insurance can help pay for their immediate medical expenses or your legal expenses when they sue.

Third-Party Property Damage

If you damage customer property, General Liability Insurance can help pay to repair or replace it.

Product Liability

If your product hurts someone or damages their property, General Liability Insurance can help pay for your legal expenses.

Advertising Injury

If someone sues you over slander or copyright infringement, General Liability Insurance can help pay for lawsuit expenses.
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