Business Liability Insurance – How Much Is Enough?
Do You Have Enough Business Liability Insurance?
One of the most common questions I get from business owners is, “Do I have enough business liability insurance coverage?”
My response? “I can’t answer that until we see the lawsuit.”
The truth is, there’s no way to predict the amount you could be sued for in a liability claim. It’s a gamble, and the stakes are high.
Let’s explore some real-life examples to illustrate this.
The Rosedale, MD Train Derailment
Several years ago, in Rosedale, Maryland, a trash truck stopped on a railroad crossing as a CSX train approached, blaring its whistle. The truck didn’t move out of the way in time. The result? Several train cars derailed. The truck was obliterated, trapping the driver inside, and the collision led to an explosion that rocked the area.
Here’s a breakdown of the fallout and the potential liability exposure for the business owner whose employee was driving the truck:
- Damage to Rail Cars: The rail cars were heavily damaged, with some completely destroyed.
- Railroad Track Damage: Hundreds of feet of railroad track were severely damaged.
- Lost Goods: The products in the derailed rail cars were either damaged or completely lost.
- Cleanup Costs: Removing the derailed cars and repairing the track was an extensive and costly process.
- Pollution Cleanup: Chemicals from the wreck seeped into the ground, requiring a significant cleanup effort to prevent environmental hazards.
- Storage Costs: The damaged rail cars and track sections needed to be stored while the National Transportation Safety Board (NTSB) investigated the incident.
- Business Interruptions: Nearby businesses suffered lost income due to road closures and the inability to operate amid emergency response efforts.
- Property Damage: Several nearby homes and buildings sustained serious damage, with some even condemned due to structural issues.
- CSX Losses: CSX incurred losses from not being able to use the damaged tracks, disrupting the movement of goods.
- Investigation Costs: The NTSB investigation into the derailment added to the total liability.
- Health Claims: People in the area reported illnesses caused by the chemicals and fumes released during the explosion.
- Injuries: Individuals near the explosion site were injured, leading to potential injury claims.
When you consider the total costs of such an event, it becomes clear that a $1,000,000 liability policy wouldn’t even scratch the surface.
Another Example: A Restaurant Fire in Baltimore
Now, let’s consider another incident. A popular restaurant in Baltimore accidentally started a fire that quickly spread to neighboring businesses. The fire originated in the kitchen, and despite the staff’s efforts to contain it, the flames spread out of control.
Here’s the fallout and potential liabilities from this incident:
- Fire Damage to the Restaurant: The restaurant itself was almost entirely destroyed.
- Damage to Neighboring Businesses: Two adjacent businesses, a boutique and a coffee shop, were also heavily damaged by the fire and water used to extinguish it.
- Loss of Inventory: The fire destroyed thousands of dollars’ worth of inventory in both the restaurant and the neighboring businesses.
- Business Interruption: All three businesses had to close for several months, leading to significant business income losses.
- Injuries to Customers and Staff: Several customers and employees sustained injuries while evacuating, leading to medical expenses and potential lawsuits.
- Cleanup and Restoration Costs: The cleanup effort was extensive, involving debris removal and restoring the property to its original condition.
- Temporary Relocation Costs: The affected businesses incurred additional costs by relocating temporarily during the restoration period.
- Loss of Goodwill: The restaurant lost significant business goodwill, and its reputation was tarnished, impacting future revenue.
In this case, a $1,000,000 liability policy would again fall short of covering the various claims and losses that could arise. Damages could easily exceed several million dollars when considering the combined costs of rebuilding, lost income, and legal claims.
How Much Business Liability Insurance Is Enough?
When you hear about a $1,000,000 liability insurance policy, it sounds like a lot—until you’re faced with situations like these. Events like a train derailment or a fire spreading to neighboring businesses can quickly reveal how inadequate that coverage might be.
The reality is that it’s impossible to predict the exact amount of liability coverage your business might need. Would $2,000,000, $5,000,000, or even $10,000,000 be enough?
The truth is, you can never have too much coverage. Because you’re not just protecting your business’s current assets but also its future earning potential.
Take Action: Protect Your Business’s Future
At Huff Insurance, we can help you assess your current liability coverage and determine if it makes sense to increase it by an additional $1,000,000 or more. If you don’t already have a business umbrella insurance policy, now is the time to get one. Every business needs one!
Give us a call today at 410-647-1111. Let’s make sure your business is protected from the unexpected.