Most businesses don’t understand the liability losses they face because they are not common claims but when they do occur they have the greatest potential to shut down a business. Below is a list of the most common exposures, and can be used as a tool to identify and then limit your business’s exposure.
1) Premise liability: created by having visitors to an organization’s premise.
2) Operations liability: created by conducting operations on an organizations premise.
3) Product liability: created by manufacturing products. In some cases just putting your brand on a product not manufactured by you will create the same exposure as if you were the manufacture.
4) Worker’s Compensation liability: created by state statutes to cover employees for related injuries and illness. In Texas workers comp is typically optional.
Rules from Texas Department of Insurance: If you do not buy workers’ compensation insurance, you are considered a “non-subscriber,” and you must notify your employees that you do not have workers’ compensation insurance. You are required to notify your employees by posting Notice 5, Notice to Employees Concerning Workers Compensation in Texas, at your work place, providing a telephone number to the Safety Violations Hotline for reporting unsafe work conditions. This notice must be placed in your personnel office and/or in a prominent place where employees can see it regularly.
You are also required to notify TDI-DWC that you choose to be a non-subscriber, or if you allow your coverage to lapse and you become a non-subscriber. Further, you must report your status as a non-subscriber each year. You are required to notify TDI-DWC by filing DWC Form-005, Employer’s Notice of No Coverage or Termination of Coverage.
5) Professional liability: created by common law, which imposes a higher duty of care on professionals. A professional owes a duty of care to refrain from an action that carries undue risk of causing harm to someone else.
6) Completed operations: created because organization is responsible for bodily injury or property damage caused by completed work when the work is completed away from organization’s premise.
7) Automobile liability: created because of drivers and owners of autos owe a duty to others to use their autos in a reasonable, prudent manner and to exercise care for the safety of others.
8 ) Management liability: created by the various duties that those in position of trust owe to those they serve. Directors, officers, and managers hold such positions.
Most likely your business has most of the risk listed above, but each business is unique in the degree and weight of a certain exposure their business face. For example you might have a mobile auto fleet making your auto liability large. Or you might be a CPA with a large exposure to professional liability. It’s important to look at your business with a risk and insurance professional to identify exposures that you can transfer to insurance or setup funding methods for the exposures you cant.