Civil liability insurance: Essential coverage for your business

Regardless of its size or operations, every company is at risk of being sued for civil liability as soon as it does business. That’s why it’s a good idea for business owners to have business civil liability insurance to protect their assets against the financial consequences of damage caused to others. That’s all well and good, but does liability insurance still have a dark side you don’t understand? You’re in luck. The following article will help you shed light on this essential coverage to keep your business going in the event of a claim or lawsuit covered by your insurance policy, with—you guessed it—complete peace of mind!

What is a company’s civil liability?

Civil liability arises from the obligation of any person or legal entity, including a business, to behave appropriately so as not to cause harm to others and to make good, if necessary, any harm caused to others by their fault, by the act or fault of another person, or by the act of property in their custody. In the course of its activities, a company could be held liable for a breach of its general obligation not to harm another person and, as a result, be required to make good on the damage in question. This is where liability insurance can come in handy, e.g., by covering certain legal costs, depending on the terms of your policy.

Where are the liability risks for your company? 

The scope of your company’s civil liability is broad and can come into play in a variety of situations. An unfortunate incident can happen quickly, and your company may be held liable for damage to a third party, particularly on the premises where you operate, or for damage related to the goods you sell or the services you provide.

That said, for your company to be held liable for a breach of its obligation to behave appropriately and then to have to reimburse the damage caused to a victim (perhaps a client, a visitor, or the neighbourhood), all of the following conditions must be met:

• A fault must have been committed.
• Harm must have been suffered.
• A causal link between the fault committed and the harm suffered must have been demonstrated.

Here are some situations where your company could be held liable:

• Damage caused by an employee harms others. For example, your staff damages a client’s floor while installing furniture.
• A failure in one of your products causes a fire.
• At an event you’ve organized, the entrance to your office, which has been poorly cleared of ice and snow, causes a visitor to take a bad fall.
• Your equipment damages the space leased for your business.

While liability risks vary in intensity and probability depending on your industry, they are real and can have significant financial consequences for your business. Taking out business liability insurance is one way of protecting your business against the monetary repercussions of these unfortunate incidents.

What does business liability insurance cover?

In business insurance, civil liability coverage protects your business against bodily harm, property damage, and certain types of harm to third parties in the course of its operations.
Some specific cases are nevertheless excluded from coverage, notably moral damages. 

However, when it comes to damage covered by your business civil liability policy, the insurer will:

• First help your company defend itself. In the event of a lawsuit, the insurance will cover your defence costs
• Compensate the victim for the harm, up to the amount of insurance provided for in your policy, if your company is held liable

What other business insurance coverage is available? 

Liability risks aren’t the only threats to the success of your business. Your company and its assets are exposed to losses and crimes that vary depending on the nature of your operations. Here are some insurance coverage options that may be appropriate for your business:

• Insurance for your company’s property, such as equipment, goods, buildings, or improvements made to leased premises
• Operating loss insurance 
• Insurance against crime and embezzlement 
• Equipment breakdown insurance 
• Cyber risk insurance

Civil liability insurance, an asset for your business 

As soon as you go into business, you need insurance to cover your company’s civil liability. Every entrepreneurial activity involves risk, regardless of sales volume, number of employees, or industry. Large, medium, and small businesses—even self-employed workers—need civil liability insurance to ensure they can continue to operate in the event of a lawsuit. In addition to protecting a company, civil liability insurance is a business asset, because many clients and partners require it from their suppliers.

Business insurance tailored to your industry

Choosing the right business insurance is key to dealing with risks that could jeopardize the success of your business plan. At Promutuel Insurance, we’ve been supporting local entrepreneurs for over 170 years, offering insurance solutions tailored to their industry—from health care to retail, construction contractors, and accommodation and food services—and in tune with different regional realities. Request a quote online or contact one of our damage insurance representatives today.

The content of this article does not constitute a legal opinion and is provided for information purposes only.