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Liabilities in Business

Updated: Sep 26, 2023

What is a business liability?

A business liability is the legal responsibility or obligation that a business entity has for its actions, decisions, products, services, or other aspects of its operations. It encompasses the potential risks and financial consequences that a business may face if it is found liable for harm or damages to third parties, including individuals, other businesses, or the public.

Running a business is exciting and rewarding! However, with the potential for success comes a slew of legal liabilities that every business owner must be aware of. One of the key ways to safeguard your business is by investing in various types of insurance coverage.

1. Accidents & Injuries

General liability insurance, often considered the foundation of business insurance, provides coverage for bodily injury, property damage, and personal injury claims that may arise during the course of your business operations. This type of insurance is crucial because it protects your business from common accidents or mishaps that can happen to anyone, no matter how careful you are.

Example: Imagine you own a small coffee shop, and a customer slips on a wet floor, suffering an injury. Without general liability insurance, you could be personally responsible for their medical expenses and legal fees. But with coverage in place, your insurance would step in to cover these costs.

2. Property Damage

Property insurance is essential if your business owns or rents physical space, equipment, or inventory. It covers damages to your property caused by events like fire, vandalism, theft, or natural disasters. This protection ensures that your business can recover and continue operations if your assets are damaged or destroyed.

Example: If you run a boutique clothing store and a fire breaks out, damaging your inventory and storefront, property insurance would cover the cost of repairs and the replacement of lost inventory.

3. Mobile Materials and Equipment

Despite its name, inland marine insurance doesn't primarily cover ships or boats. Instead, it protects goods in transit over land. If your business frequently transports equipment, products, or materials, this coverage is crucial. It safeguards against damage or loss during transport.

Example: You operate a construction company, and a truck carrying expensive machinery is involved in an accident, resulting in damage to the equipment. Inland marine insurance would cover the repair or replacement costs.

4. Vehicular Accidents

If your business uses vehicles for deliveries, client visits, or any other work-related purposes, you need commercial auto insurance. This type of coverage is similar to personal auto insurance but tailored to the specific risks associated with business vehicle use.

Example: You run a catering business, and one of your delivery vans is involved in a collision while transporting food to an event. Commercial auto insurance would cover the vehicle repair costs and any liability claims if others are injured.

5. Negligence/ Errors & Omissions

Also known as errors and omissions (E&O) insurance, professional liability insurance is essential for businesses that offer services or professional advice. It protects against claims of negligence or mistakes that result in financial losses for your clients.

Example: You run an accounting firm, and a client accuses you of making an error that led to a significant financial loss. Professional liability insurance would cover the legal costs of defending against the claim and any settlement or judgment.


Legal liabilities are an inherent part of running a business, and they can arise when you least expect them. To protect your business and personal assets, it's vital to invest in the right insurance coverage. General liability insurance, property insurance, inland marine insurance, auto insurance, and professional liability insurance are all essential components of a comprehensive risk management strategy. By securing these types of coverage, you can focus on growing your business with peace of mind, knowing that you're prepared for whatever challenges may come your way.

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