Myth: General liability covers financial losses due to professional mistakes.
Fact: General liability policies cover bodily injuries and property damage. They don’t, however, cover financial losses caused by failing to deliver a certain service i.e. a professional service. General liability insures products or a completed operation: actions that are performed once and then done (the job is obviously completed right then and there). Professional services refer to mishaps due to opinions, services, solutions or recommendations provided during the course of business. It could take years for a professional service’s “error” to show up in a product.
For example, let’s say your client was a building designer. If it was later determined that a design error led to financial losses (e.g. the building proved to be structurally unsound), this wouldn’t be covered under a general liability policy. The design would fall under the category of professional service.
Professional liability will insure against professional service mistakes. A policy can also extend to contingent bodily injuries and property damage.
Myth: Adding sub-contractors to a general liability policy covers them also.
Fact: You can add as many sub-contractors as you want to a general policy – but you’ll run into the same problem as the first myth. A general liability policy will not cover a sub-contractor’s professional services. Make sure each sub-contractor has their own insurance because your clients are liable for any work performed by them.
Myth: General liability covers workers anywhere.
Fact: General liability policies are not designed to cover intangible data or published private information exposed by a data breach. In a recent coverage disrupted between Sony Corporation and Zurich Insurance Company, a New York trial court ruled that Zurich American Insurance Company has no duty to defend Sony Corporation of America under the General Liability (GL) policy for a matter involving a data breach of the Sony Playstation Network. The court ruled acts by third-party hackers do not constitute “oral or written publication in any manner of the material that violates a person’s right of privacy” in the Coverage B (personal and advertising injury coverage) under the policy.
The fact is most clients overestimate the protection provided by their general liability policies. Talk to an experienced wholesaler – such as Burns & Wilcox – about professional liability to ensure your clients avoid any gaps in their coverage.