The commercial property policy is the foundation of a business property insurance program. An organization will purchase such a policy to protect its building and the contents inside it from unexpected loss. One of the greatest exposures facing a business is the probability of incurring loss of income. Imagine that someone leaves the coffee pot on overnight which leads to a fire, and all of your computers, furniture, and upgrades are destroyed. How long would it take you to get back up and running? Do you have a disaster recovery plan? Does your business have enough free capital to continue operations? If the answer is “no” to any of these questions, a commercial policy (like a business owners policy or commercial package policy) is the solution.

The coinsurance provision in the building and personal property coverage form requires the insured to purchase a limit of insurance that is at least equal to a specified percentage of the full value to replace the covered building or contents. The coinsurance clause is designed to protect the insurer against clients that wish to underinsure their building or contents. If there is a substantial loss, and the amount of coverage is less than the applicable coinsurance required minimum, the claim payout is proportional to the coverage amount requested compared with the coinsurance amount required.

Lastly, if you rent or own a building and decide to upgrade the inside of the building, be aware that your policy does not automatically cover such enhancements. You will need to endorse the policy accordingly to ensure that the upgrades are adequately insured.

There is that word again: liability. Liability can be included within a business building or contents policy, or the policy can be purchased separately (distinct for service operations and operations that do not require an office/retail space).

The commercial liability loss exposure is far greater than that of an individual, mainly because a business will typically have greater assets than that of an individual. Entity selection is of the utmost importance when establishing a base to protect one’s personal assets from business liabilities. Commercial liability will pay injury expenses and punitive damages to a claimant once the insured is legally obligated to pay, i.e., a lawsuit.

• General Liability: Bodily injury, sickness, or disease sustained by a person. Example: Your customer slips on a wet floor, falls, and injuries his or her back.
• Property Damage Liability: Damage to a customer or 3rd party property. Example: Joe Painter spills paint on the computers and desk at a jobsite, forcing the customer to replace all of the items. The customer’s CGL policy will pay for the damages to the customer’s property.
• Personal and Advertising Injury: Identical to General Liability except for the types of injury being insured. Personal and Advertising Injury can consist of: oral and written publication, copyright infringement, wrongful eviction, malicious prosecution, and false arrest. Advertising means “public statements” or available to public.
• Medical Payments: Medical expenses incurred by a 3rd party, namely someone that has no contractual relationship with the insured.
• Damage to Premises Rented to You: Also known a “fire legal liability.” Damage to property that an insured rents is covered under this liability coverage part.
• Products and Completed Operations: Includes all bodily injury that occurs away from the insured’s premises and arises out of the insured’s product or the insured’s completed work. “Your work” is a defined term in the CGL policy. It includes work and operations performed by the named insured or work performed by another on the named insured’s behalf (subcontractors). It also includes the materials, parts, and equipment furnished in connection with your work. General liability will not pay for the insured’s defective work, as it is not a guarantee of performance. The CGL does cover the insured’s liability for work done by a subcontractor however.
• Professional Liability: A professional is a person who provides a service in accordance with an established set of standards depending upon the particular profession. Examples of professional liability candidates are: doctors, lawyers, insurance professionals, and accountants. These policies cover errors and omissions, product failure, professional liability, personal injury, and security failure.

The commercial auto policy differs from the personal auto policy when naming who is an insured and which vehicles are covered under the policy.

If Larry runs a landscaping business as an LLC yet owns the vehicles under his personal name, he runs the risk of being sued personally in the event of a major auto loss. This is why it is a good idea to register the vehicles commercially and insure them this way, as the liability limits are far greater and more broad under the BA.

The vehicles that are covered are classified under the business auto declarations symbol. Symbol 7 is most restrictive, as it covers only the vehicles listed on the policy, while Symbol 1 is the least restrictive, offering coverage for any auto which the insured or employees of the insured drive.

Where many business owners get into trouble is under the permissive use feature of the policy. Hired workers or those who borrow the insured’s vehicle are not named insured’s under the covered auto Symbol 7.

Workers compensation insurance is unique in that the coverage it provides is stated more specially in the law than in the policy. To understand the policy, one must understand the applicable state employment laws. In every state, workers compensation laws apply to all employments except those which are specifically excluded.

In most states, sole proprietors, partners, and LLCs are not covered employees under the act, but they may elect to be covered.

Workers Compensation coverage provides both medical benefits and disability benefits to those employees that are injured on the job.

If an employee is injured on the job and unable to work as a result, you will be sued by the employee, as the state will not offer any coverage. Employers who do not have workers compensation coverage may be subject to lawsuits by employees and to criminal prosecution by the commonwealth.

The PA workers compensation act can be found here.

There are 4 ways to purchase workers compensation:

1. Through an insurance agent or broker.
2. Direction from the 300+ private sector insurance carriers who write workers compensation policies.
3. Apply for self insurance status.
4. Obtain insurance from State Workers Insurance Fund (new businesses).

Employee or Independent Contractor?
Employers who hire independent contractors only are not required to carry workers compensation insurance. Problems arise when workers are injured, and there is no coverage afforded by workers compensation.

A worker is consider to be an employee unless proven otherwise. To be an independent contractor, one must be free from control or direction over the performance of services included, and the individual must be customarily engaged in an independently established trade, occupation, profession, or business.

If an individual performs services in the construction industry, the “Construction Workplace Misclassification Act” imposes additional criteria which must be met for the individual to be recognized as an independent contractor. One of these criteria is that the individual must have a written contract to perform services. Click here for more information on this act.