We all know how easy it is to click the “I Agree” button on a website or for a piece of software when it is required. Most of us don’t read the fine print and have no idea what we are agreeing to. Sometimes that can come back and bite us later on.
Insurance policies are contracts, just like those terms and conditions. You are usually made aware of the terms and conditions of an insurance contract twice: once when you receive the quote or proposal and then when you receive the policy.
Do you read them? If not, you should. What you don’t know can hurt your business. Here are a few sample liability exclusions and endorsements that could come back to haunt you.
Designated Premises Endorsement
This endorsement, sometimes called Limitation of Coverage to Designated Premises or Project (CG 21 44 sample here), is most often used on liability policies that are project or location-specific. However, the endorsement may show up on liability policies to help curb premium costs.
Let’s say you run a restaurant. Most restaurants operate out of a fixed location. So the liability coverage is limited to anything that happens at your restaurant on 123 Main Street. Now your cute little Anytown, USA is going to have a centennial celebration in the town square two miles down the road. You’ve decided to set up a booth there to sell food and drink.
If your policy has a Designated Premises Endorsement, there would be no coverage for bodily injury or property damage incurred by patrons of your restaurant’s booth while they are at the centennial celebration. That could be a problem for your business.
Alternately, let’s say you are a contractor. You tell your agent which projects you are currently working on or you are about to start. When your policy is issued it includes all of those projects. What happens if you start a new project and fail to inform your agent? No coverage, because the project isn’t on that designated projects list.
If possible, these endorsements should be avoided. If you see this endorsement or one like it on your quote or policy, talk to your broker about having it removed, or ask your broker to get you a quote from a different insurance company.
Animal Exclusion/Canine Exclusion
Once upon a time, there was a business that used guard dogs to protect their business overnight. This business was hit by burglars and they left the gate open, so the dogs got out. One of the dogs attacked someone on the street, causing bodily injury and property damage. The injured person decided to sue the business.
The business had disclosed they had guard dogs but selected a quote where there was an Animal Exclusion (sample here) on the policy. There is no coverage for this incident, which means any legal and/or medical expenses would be the responsibility of the business owner.
If there are any animals on your business premises at any time, even incidentally, it is important to select the coverage that does exclude animals. It could, quite literally, come back to bite you later.
Products Liability Exclusion
In most general liability policies there is coverage for Products/Completed Operations, which many companies believe gives them coverage for all of their products liability needs. In many cases, it does not.
Within the actual Commercial General Liability coverage form (CG 00 01) there is coverage for products-completed operations, but some companies may include the Exclusion – Designated Products (CG 21 33) endorsement or a similar endorsement that excludes coverage for some of your products, or all of them.
Failure to cover just a few or all of your products could be a huge problem if you are in the business of selling and/or producing a product for sale. In most cases, you can get around this exclusion by purchasing a separate products liability insurance policy. You can also ask your broker to quote Commercial General Liability that includes products liability for all of your products.
As with any contract, Hayes Brokers recommends that you do not sign on the dotted line until you have read and fully understand how all of the policy endorsements and exclusions could affect your business. What you don’t know can hurt you.