Your Business Liability Insurance may Provide Coverage if your Business is Sued

The Business Litigation Lawyers at Halling & Cayo recently took on the representation of an out of state manufacturer sued for an alleged negligent failure to warn on its product that allegedly caused a fire. While the facts of the case are disputed, the relevant part is that the business did not know that its business insurance policy provided coverage for this sort of allegation. We were retained by the business, we answered the lawsuit, and we immediately reviewed their policy for coverage. We were able to obtain coverage for the business to pay its legal fees and coverage for the underlying alleged negligence (if proven).

There is a common misconception that unless your business has errors and omissions insurance, you are on your own if you get sued. That is true in some contexts, as generally errors and omissions insurance is to cover alleged poor workmanship, performance, or malpractice, which most general liability policies do not cover. However, there are many other instances, such as the one in our recent case, where the business’ general business coverage includes coverage for alleged damage caused by the business’ product.

Your Business Liability Insurance May Provide Coverage if Your Business is Sued

If your business faces a lawsuit related to product liability, your existing business insurance policy may already provide coverage. Understanding the extent of this coverage and working with legal counsel can help you navigate the complexities of such a lawsuit.

Types of Business Insurance That May Provide Coverage

1. General Liability Insurance: This type of policy often includes coverage for product liability claims. It can help cover legal fees, medical expenses, and damages awarded to the plaintiff.
2. Product Liability Insurance: If your business has a separate product liability insurance policy, it specifically covers claims related to product defects. This can provide additional protection beyond general liability insurance.
3. Business Owner’s Policy (BOP): A BOP combines general liability insurance, property insurance, and other coverages into one policy. Many BOPs include product liability coverage, offering comprehensive protection for small to medium-sized businesses.

Steps to Take If You Are Sued

1. Contact Your Insurance Provider: Notify your insurance provider as soon as you become aware of a potential lawsuit. They can guide you through the claims process and help you understand your coverage.
2. Review Your Insurance Policy: Work with your legal counsel to review your insurance policy and understand the extent of your coverage, including any limits or exclusions. This will help you anticipate potential out-of-pocket expenses.
3. Gather Documentation: Collect all relevant documentation, including product designs, manufacturing records, and communication with the customer. This information will be crucial in defending your case.
4. Engage Legal Experts: Hire an experienced attorney who specializes in product liability cases. Your insurance provider may also provide legal assistance as part of your coverage or allow you to have counsel of your choice approved to be paid by your policy (depending on the terms of the policy).

Why Work with Legal Counsel?

Working with legal counsel is essential when facing a product liability lawsuit. They can help you:

• Interpret the terms of your insurance policy and understand your coverage.
• Navigate the legal process and develop a strong defense strategy.
• Negotiate with the plaintiff and insurance company to reach a favorable outcome.

Conclusion

If your business is sued for product liability, your existing business insurance policy may provide coverage. By working closely with your insurance provider and legal counsel, you can navigate the complexities of a lawsuit and protect your business from financial risks. At Halling & Cayo S.C., we’re here to guide you through the process and ensure you have the protection you need.